Opportunity Zones

Opportunity Zones are a crucial part of the Tax Cuts and Jobs Act of 2017, designed to entice investors to contribute to areas in need. These areas, known as Opportunity Zones, were identified in 2018 based on factors like poverty rates, unemployment rates, the number of children in poverty, violent crime rates, and population.

A section of Mt. Vernon, Illinois, has been recognized as an Opportunity Zone, thanks to the Tax Cuts and Jobs Act. This legislation empowered state Governors to select specific census tracts as Opportunity Zones. The primary objective of this program is to stimulate economic growth and job creation in low-income communities by offering attractive tax benefits to investors who direct their funds into these areas.

How do Opportunity Zones Drive Economic Development?

Opportunity Zones encourage economic development by providing a range of tax benefits for investors:

1. Tax Deferral: Investors can postpone their tax obligations on profits invested in a Qualified Opportunity Fund (QOF) until they sell their QOF investment or until December 31, 2026. Holding the investment for more than 5 years results in a 10% exclusion of the deferred gain, and this increases to 15% if held for more than 7 years.

2. Tax-Free Gains: If an investor keeps their investment in an Opportunity Fund for at least ten years, any gains realized become tax-free. This doesn't include the original gain but pertains only to the new gains generated by the investment.

What are the Benefits of Opportunity Zones?

When you sell an investment, you can reinvest the proceeds into a business or property within Mt. Vernon's Opportunity Zone. This smart investment strategy allows you to defer tax payments on your original gain by reinvesting in Opportunity Zone property, contributing to the local community's improvement. Holding your investment for more than 5 years offers a 10% exclusion of the deferred gain, and this exclusion increases to 15% if you maintain the investment for over 7 years. By keeping your investment in the Opportunity Fund for ten years, you become eligible for an increase in basis equal to the fair market value of the investment when you decide to sell it. This essentially means that the gains from your investment become tax-free.

In a nutshell, Opportunity Zones aim to attract investors to underdeveloped areas by providing tax incentives. 

To find out more about the Opportunity Zone and how to apply, contact the Jefferson County Development Corporation.