OPPORTUNITY FUNDS: A HUGE BENEFIT TO ALL AMERICANS
There is an estimated $6.1 trillion of paper profits currently held by investors on American balance sheets. Those gains are not yet taxed, and 8,700 areas in the United States, ranging from rusty industrial towns to dusty rural hamlets, are in desperate need of revitalizing investments. The Trump Tax Act of 2017 (Tax Cuts and Jobs Act of 2017) contains a tax incentive that will be a huge benefit to both of those groups. It is officially called the Investing in Opportunity Act.
This act had its beginning in 2007 when a young billionaire, Sean Parker, met with Senator Timothy Scott of South Carolina. Both were seeking a solution to getting more investments into run down neighborhoods. After forming a coalition of other billionaires, congress representatives and senators, then working together for almost ten years, the bill finally became law.
Forbes Magazine says investors will soon be able to plow recently realized capital gains into projects or companies in Opportunity Zones, slowly erase the tax obligations on a portion of those gains and, more significantly, have those proceeds grow tax-free. There are almost no limits. No limits on how much you can put in, how much tax you can avoid and, for most of the country, the types of taxes you can avoid, whether federal, state or local. No limits on how long those proceeds compound tax-free. And precious few limits on what types of investments you can make.
Parker says, “The incentive needs to be powerful enough that it can unlock large amounts of capital, aggregate that capital into funds and force the funds to invest in distressed areas. Instead of having government hand out pools of taxpayer dollars, you have savvy investors directing money into projects they think will succeed.”
Senator Cory Booker, a New Jersey Democrat who cosponsored the bill, said, “If we can get the trillions of dollars of capital off the sidelines and get the best investment minds coming into our communities, we can end up creating jobs and opportunity.”
“The great thing about this legislation is it can bring together sectors that may not have worked together before,” says Jim Sorenson, a Utah-based entrepreneur and impact investor who was an early part of Parker’s coalition. “There can be a great collaboration between state and local entities to add more incentives to further sweeten the pot.”
The attorneys at Wilson, Bradshaw & Cao, LLP are happy with this new tax incentive for investors, and are prepared to assist you with setting up an Opportunity Fund, and advising you about all the options for investing into it.