Comstock's magazine 0519 - May 2019 - Page 90

City of Sacramento “It should be a good tool to get social equity projects built and use capital that’s currently parked in tax-shielded programs, not doing anything for the greater community.” -JEFF HARRIS, COUNCILMAN, DISTRICT 3 90 | May 201 9 An investor sets up a corporation or a partnership specifically to establish an “op- portunity fund” to invest in a designated opportunity zone and can benefit in three ways. They may defer their capital gains tax bill until they sell their opportunity zone in- vestment or Dec. 31, 2026, whichever comes first. Or they may receive a reduction of their capital gains taxes of the original investment amount by 10 percent if they hold on to the investment for five years, and that bumps up to 15 percent if they keep it for seven years. If they keep an investment for at least 10 years, they will be exempt from paying taxes on capital gains. Capital gains from stocks and other sources are eligible. “There’s great flexibility for in- vestors,” says Leslie Fritzsche, City of Sacramento senior economic develop- ment project manager. “Opportunity funds can be established by individuals, groups or companies with capital gains, and eligible projects include real estate development and business develop- ment,” she says. Invigoration for Investors Opportunity zones reward patience. All incentives — the tax treatment of cap- ital gains — encourage longevity in an investor’s stake in an opportunity fund. Aaron Marchand, vice president of Turton Commercial Real Estate, says buyers are asking about opportunity zones now. “People are learning the process of setting up opportunity funds, and it’s spurring activity,” he says. “Ev- eryone is hoping this is a positive eco- nomic driver to the investment world. If the market turns, it could spook some investment, but even if interest rates increase, the variables of opportunity zones may help weather it.” Marchand says the tax incentives are luring potential investors from oth- er areas. “This incentivizes buyers to look at this market,” he says. A Bay Area group has purchased what could be one of downtown Sacramento’s first opportunity zone projects. “This sale is a big, empty building at 830 K St. that