An Introduction to Opportunity Zones. The Investing in Opportunity Tax Act was enacted to incentivize long-term incentives in urban communities.
The Tax Act provides significant tax benefits for investors reinvest unrealized capital gains.
2. Opportunity Zones will help connect low-income
communities with much-needed capital
• Capital – U.S. households and
corporations held an estimated $6.1
trillion in unrealized capital gains at
of the end of 2017.*
• Connect – Opportunity Zones offers
a frictionless way to put capital
gains to work and provide needed
equity investment to fuel new
enterprise and business activity in
distressed communities in exchange
for a graduated series of incentives
tied to long-term holdings.
* Based on EIG’s analysis of the Federal Reserve’s Survey of Consumer Finances and Financial
Accounts of the United States 2
Opportunity Zones is the first new community investment program in a generation with the
potential to be the largest in U.S. history
3. 3Sources: Economic Innovation Group
Opportunity Zone Tax Benefits
Defer Reduce Eliminate
75%
Investing in Opportunity Zones provides investors with three economic incentives:
A temporary
deferral: An investor
can defer capital
gains taxes until 2026
by putting and
keeping unrealized
gains in an
Opportunity Fund.
A reduction: The original
amount of capital gains on
which an investor has to
pay deferred taxes is
reduced by 10% if the
Opportunity Fund
investment is held for 5
years and another 5% if
held for 7 years.
An exemption: Any
capital gains on
investments made
through the
Opportunity Fund
accrue tax-free as
long as the investor
holds them for at
least 10 years.
4. 4
Small Business America
National Small Business
Small businesses are companies that have less than 500
employees and generate revenue of less than $100 million.
There are roughly 30 million small businesses employing over
57 million U.S. residents, nearly 50% of the U.S. employment.
New Jersey Small Business
There are roughly 843,000 small businesses employing over 1.8
million NJ residents, nearly 50% of the state’s employment.
Small businesses employ over 1 million people every year
Sources: Small Business Administration (S.B.A.)
5. 5Sources: FDIC and National Venture Capital Association
Inadequate access to capital limits growth opportunity for small businesses
Nearly one out of every four
community banks has
disappeared since 2008
In real terms, small
business lending remains
down by a quarter
$0
$200
$400
$600
$800
1995 2016
Billionsof2009dollars
75% of all venture capital
concentrates in three states:
California, New York &
Massachusetts
0
2,000
4,000
6,000
8,000
10,000
2000 2005 2010 2015
Number of U.S. Community Banks
75%
6. Over 8,700 census tracts across all U.S. states and territories are now certified Opportunity Zones
6Explore the map at eig.org/opportunityzones
Where are these Opportunity Zones?
7. Opportunity Zones in New Jersey
7
Opportunity Zones
169
Zone Residents
732K
Zone Jobs
1.9M
Zone Businesses
126K
71%
Non-white
26%
Average Poverty Rate
$45,000
Median Income
Sources: Economic Innovation Group
8. Opportunity Zones in Newark
8
Opportunity Zones
13
Zone Residents
48K
Zone Jobs
95K
Zone Businesses
3K
89%
Non-white
35%
Poverty Rate
$35,400
Median Income
Downtown
Riverfront Stadium
Rutgers
University
Consolidated Rail
Corporation
Sources: Economic Innovation Group
9. 76%
24%
Metropolitan
Non-Metropolitan
A profile of the country’s new map of Opportunity Zones
Sources: U.S. Census Bureau and ESRI Business Data
Note statistics are for the 50 states and the District of Columbia
31.3 million residents
24 million jobs
1.6 million business
establishments
9
¾ of Opportunity Zones
lie within metro areas
10 percent of the country’s
population resides within a zone
35.0 million including
Puerto Rico and the
other territories
There’s a strong foundation
on which to expand
10. 10
$100 $111
$132
+ $9
+ $15
+ $44
$0
$100
$200
5 years 7 years 10 years
After-TaxValueofInvestment
Holding Period
Comparing an O-Fund to a Standard Investment:
Scenario: A Capital Gain of $100 is Reinvested in 2018
Standard Portfolio Investment Excess Returns Offered by an O-Fund Investment
Incentives Offered by the Program
It takes five
years for a
standard
investment to
recoup capital
gains taxes
paid in 2018
Deferral
+ 10% step-up
in basis
Deferral
+ additional 5% step-
up in basis
Deferral
+ total 15% step-up in basis
+ permanent exclusion of
O-Fund gains from taxes We estimate that the
program offers long-
term investors a 3.0%
higher rate of return
after taxes than a
comparable investment
outside of the program.
In other words, it
returns $44 more dollars
for every $100 initially
invested after 10 years.
How strong is the incentive?
Sources: Economic Innovation Group