Following an extensive review process involving officials from a number of state government agencies, Kansas Governor Jeff Colyer, M.D. has announced the 74 census tracts he is nominating for designation as Opportunity Zones.
Census tracts designated as Opportunity Zones, a new economic development tool enacted by the Federal Tax Cuts and Jobs Act of 2017, will offer local citizens the opportunity to invest back into their communities and proactively be a part of the solution to problems such as population decline, lack of jobs, and crumbling infrastructure.
For the investor, the Opportunity Zone program offers tax incentives to citizens who re-invest their unrealized capital gains into Opportunity Funds dedicated to investing in designated census tracts. The program provides deferral and reduction of capital gains taxes when the gain is invested in a Qualified Opportunity Fund and maintained for at least five years. Additional tax incentives are available for investments held for periods of seven and 10 years.
In February, the Kansas Department of Commerce announced it would begin accepting Letters of Interest from communities to have their eligible low-income census tracts designated as Opportunity Zones. Following the review of submissions, Gov. Colyer determined that each community who submitted an eligible census tract would be nominated for at least one Opportunity Zone designation. The governor has utilized the available 30-day extension from the U.S. Department of the Treasury to work with local leaders to finalize the specific census tracts designated within each community.
The specific census tracts and their counties to be included in the governor’s nominations for designation as Opportunity Zones are:
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Opportunity Zones are an economic development tool enacted by the Tax Cuts and Jobs Act of 2017 designed to encourage long-term investments in low-income urban and rural communities.
This provides incentives to investors to move capital off the sidelines and into projects which will stimulate the Kansas economy.
This program provides a tax incentive for investors to re-invest their unrealized capital gains into Opportunity Funds that are dedicated to investing in economically distressed areas designated as Opportunity Zones by the Governor.
The program provides deferral and reduction of capital gains taxes when the gain is invested in a Qualified Opportunity Fund and maintained for at least 5 years. Additional tax incentives are available for investments held for periods of seven years and 10 years.
Based upon the number of low-income communities identified by the Federal Census, the Governor can designate 70 census tracts in Kansas communities as Opportunity Zones. Census tract eligibility is based upon population and income.
Eligible low-income communities are defined as:
- Tracts in which the poverty rate is at least 20 percent, or
- Tracts in which the median family income does not exceed 80 percent of the statewide median family income if located outside of a metropolitan area, or
- Tracts in which the median family income does not exceed 80 percent of the statewide median family income or the metropolitan area median family income, whichever is higher.
Qualifying low-income communities may be designated as Opportunity Zones as well as up to four qualified communities contiguous to designated low-income communities.
The U.S. Department of the Treasury has published a map and list of eligible census tracts, available at https://www.cdfifund.gov/pages/opportunity-zones.aspx.
In addition to the federal eligibility criteria, the State will consider several other factors in determining which census tracts to designate as Kansas Opportunity Zones.
These factors include an indication of community interest and support for additional investment, the potential of at least one “ready to go” or otherwise identifiable project, and that the identified project addresses one of the following target uses: industrial/business development, housing, or agriculture.
While these factors will be considered during the designation process, eligible communities without one or more of these factors present may still be considered for Opportunity Zone designation.
Other links of interest: