While much was made of the implications of recent tax reform on the real estate world, one little-noticed program created by the law is Opportunity Zones (OZs) — of which the District will soon nominate 25.
DC is one of several localities that can select up to 25 percent of the city's qualifying low-income census tracts as "Opportunity Zones", or areas with associated tax incentives to encourage development and job creation. In February, Mayor Bowser's office solicited feedback on where the zones should be located, and due to overwhelming response, the city requested a 30-day extension from yesterday's deadline.
The city has already identified 18 possible zones (Walter Reed is rumored to be one), and the remaining seven will fall into three categories:
- East of the River, where the amount of housing and open park space greatly out-proportions the amount of commercial space
- Retail corridors, which encompass census tracts with an abundance of mixed-use and commercial strips (e.g. Brightwood, Brentwood, Fairfax Village, Twining, LeDroit Park and Naylor Gardens)
- Creative industry and manufacturing zones, which have a higher share of commercial space and the majority of the city's industrial land, a mixed-use "Main Street" and multi-use neighborhood centers (e.g. Trinidad, Ivy City and Eckington).
Once Zones are approved by the Treasury Department, entities will be able to incorporate Opportunity Funds, which are investment vehicles that enable capital gain deferrals on sales or exchanges of property between Fund investors. Ninety percent of assets in a Fund must be OZ properties (whether tangible property, stock or partnership interest).
DC is expected to announce the Zones in late April.
This article originally published at https://dc.urbanturf.com/articles/blog/dc-soon-to-unveil-opportunity-zones/13737.
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