Opportunity Zones are defined as “economically-distressed communities where new investments, under certain conditions, may be eligible for preferential tax treatment.” In other words, the government lessens tax burdens for entrepreneurs who invest in areas that require an economic boost—which not only revitalizes communities, but injects job opportunities into areas that need it most.
This public policy tool was expanded as part of the Tax Cuts and Jobs Act—legislation that was passed and signed into law in 2017.
Once an Opportunity Zone is established, corporations and individuals are encouraged to open businesses in these areas via tax incentives to help improve the economy and create jobs for the residents.
These tax benefits are significant. Benefits include tax deferrals—which give entrepreneurs the opportunity to delay tax payments until 2026 (or until the business closes or is sold). In addition, if entrepreneurs sustain operations in a community for 10 years, taxes owed on profits are forgiven.
As the adage goes, a chain is only as strong as its weakest link. By encouraging business activity in areas that are struggling economically, private investment can be used as a tool to strengthen the country as a whole.