It’s difficult to explain to somebody not from the United States how one part of a state can be thriving and one that is just one mile away can be having employment issues, but that is Arizona. This is why Arizona is a top opportunity zone.
Arizona has been experiencing a good amount of investment as of late. Investment companies and private investors have taken advantage of the state’s geographical location and whether to build massive real estate developments and lavish golf country clubs.
Still, despite all of the investment that has been done to the state of Arizona there are parts that are suffering dramatically. Many cities in Arizona look like ghost towns, the once powerful industries that used to give jobs to the hundreds of thousands of residents are all gone now.
Arizona has a very interesting geographical position in that it boasts a desert climate perfect for retirees, while also having a large part of its cities border Mexico. The Invest in Opportunity Act, which introduced the concept of opportunity zones could benefit Arizona in more ways than one.
Arizona was one of the first states to present to the Government their list of designated areas that could be deemed as opportunity zones and it was one of the first states to be approved, taking less than a month for the process to be complete.
The Opportunity Zone program, which is part of the Tax Cuts and Job Act, allowed the governor of each state to nominate up to 25 percent of the qualifying low-income Census tracts as Opportunity Zones.
Investment companies and private investors can benefit from this program by receiving substantial reductions on capital gains taxes depending on the period of time in which the investment is held.
In summary, the Opportunity Zones Program offers three major tax benefits making it superior to most programs aimed at incentivizing investment into distressed areas. The three major tax benefits are:
- Tax on income for capital gains is temporarily deferred if you reinvest them into an Opportunity Zone
- Capital gains reinvested into an Opportunity Zone will exclude up to 15 percent of the original gain from being taxed
- Capital gains from the sale of an investment in an Opportunity Zone are not taxed if the investment is held for a period of 10 years
If you hold your investment for a period of 5 or 7 years your capital gains taxes also get deferred, the more you hold your investment the more tax you can reduce as long as the investment is in one of the designated areas.
Arizona has huge parts that were designated opportunity zones, just in the city of Phoenix alone you will find 42 Opportunity Zones. Which a prime area for investment as there is a lot of potential in those areas.
Several non-profit institutions have been started to promote investment and so far the results have been lukewarm. The program just started one year ago and there have been a lot if interested parties, but unlike other states, there still hasn’t been a major project to come out of the program.
It is hard to pinpoint Arizona as parts of the state are doing fine, but some are in dire need of a job. The main selling point for industries who are building huge real estate developments is to focus on American retirees and golfers.
Thankfully, the type of business that you are allowed to do within the Opportunity Zone program allows for the construction of this real estate development or massive industrial sites that create thousands of jobs. The types of businesses that are included in the program include:
- A business where all of the property owned or leased by the taxpayer is qualified Opportunity Zone property
- A business where more than 50 percent of total gross income is derived from such business
- A business where a substantial portion of the intangible property is used in such business activity
- A business where less than 5 percent of the assets are invested in nonqualified financial property
Of course, there are a number of tax benefits associated with investing in opportunity zones, but the best part is that your investment will help create jobs and will be welcomed with open arms into the community.
I hope you’ve found this article on Opportunity Zones to be helpful. For more information, or for assistance in investing in an Opportunity Zone, please contact us below by filling out the form, Thank you.