There’s a new incentive for entrepreneurs to invest in Staunton’s West End.
Governor Ralph Northam announced earlier this year that 212 census tracts in Virginia were accepted into the federal Opportunity Zones program, an initiative that offers tax incentives to investors in communities that could benefit from revitalization.
Two census tracts in Staunton were accepted into the program. The tracts are located on the West End of the City, stretching from the Central Business District westward along the Churchville Avenue, West Beverley Street and Middlebrook Avenue corridors.
“The Opportunity Zones program incentivizes investors to develop areas in need of revitalization by deferring federal taxes and reducing tax payments. It’s a win-win; the community benefits from new commerce, and investors have an opportunity to launch a profitable venture,” said Mayor Carolyn Dull. “Accompanied by the passion and energy of the West End Alliance, we hope new development and entrepreneurship will flourish through this program.”
How it Works
The Opportunity Zones program is designed to incentivize patient capital investments in communities that could benefit from revitalization. All of the underlying incentives relate to the tax treatment of capital gains, and all are tied to the longevity of an investor’s stake in a qualified Opportunity Fund, providing the most upside to those who hold their investment for 10 years or more.
An Opportunity Fund is an investment fund, organized as a corporation or partnership, that invests in property in Opportunity Zones. Some Opportunity Funds may be created for a specific project, such as a large apartment building. Other Opportunity Funds may be more like mutual funds, where there is a large range of investments that evolve over time.
An investor can realize substantial tax savings through the program. An investor who has triggered a capital gain by selling an asset like stocks or real estate can receive special tax benefits if they roll that gain into an Opportunity Fund within 180 days.
There are three primary advantages to rolling over a capital gain into an Opportunity Fund:
- defer the payment of capital gains until Dec. 31, 2026;
- reduce the tax owed by up to 15 percent after seven years; and
- pay zero on gains earned from the Opportunity Fund.
The IRS is in the process of refining guidelines for Opportunity Funds and how the program operates, as Congress recently passed legislation creating the program in December 2017. The IRS said it expects the financial industry to begin creating Opportunity Funds in earnest in late 2018, once the regulations are in place.
Investors interested in learning more about the program should contact Billy Vaughn, Director of Economic Development, at 540.332.3869 or email [email protected].
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