Parts of Traverse City and Garfield Township can add themselves to another list. A list of designated “Opportunity Zones” around the country.
A little known provision of the Tax Cuts and Jobs Act of 2017 was a provision designed to incentivize development in troubled and low-income areas designated as “Opportunity Zones.”
How it Works
There are three primary incentives for Opportunity Zone investors:
- Temporary Deferral: A temporary deferral of inclusion in taxable income for capital gains reinvested into an Opportunity Fund. The deferred gain must be recognized on the earlier of the date on which the opportunity zone investment is disposed of or December 31, 2026.
- Step-Up in Basis: For capital gains reinvested in an Opportunity Fund the basis is increased by 10% if the investment in the Opportunity Fund is held by the taxpayer for at least 5 years and by an additional 5% if held for at least 7 years, thereby excluding up to 15% of the original gain from taxation.
- Permanent Exclusion: A permanent exclusion from taxable income of capital gains from sale or exchange of an investment in an Opportunity Fund if the investment is held for at least 10 years. This exclusion only applies to gains accrued after an investment in an Opportunity Fund.
Opportunity Zone in GT County
The lone tract qualifying within Grand Traverse County was tract 5513 which includes areas of the city along Garfield Ave and Barlow St., and portions of Garfield Township around South Airport Rd. and south Cass St. [Link to Map: https://www.michigan.gov/documents/mshda/MSHDA-Opportunity-Zone-Prosperity-Region-02_616740_7.pdf ]
After advocating for Grand Traverse County’s inclusion, the Chamber was notified last year that the U.S. Treasury Department had included the Grand Traverse tract in its final order.
While we aren’t sure at this point what kind of impact the Opportunity Zone will have in Grand Traverse County, we know this designation does present a terrific opportunity for property owners, developers and investors looking to impact a high-opportunity area within the region. The tract is a gem in that it is within one of the fastest growing counties in the state, is situated along major corridors, already has significant commercial and industrial zoning and infrastructure in place.
Cowell: Welcome to the Land of OZ!
The designation caught the attention of major venture capital investor Casey Cowell, whose team was a major partner in advocating for Grand Traverse County zone’s inclusion by Treasury.
Casey wrote about the opportunities that exist for investors within these zones, and why these zones are a good thing for the community.
Read Casey’s GT Business Mag article: https://boomerangcatapult.com/welcome-to-the-land-of-oz/
Developers, property owners and investors in the region are strongly encouraged to consider this investment incentive and the opportunities and resources available inside this tract.
Nerd’s Eye View: How it works
Vance Maultsby is a CPA and partner of a major corporate accounting firm in Dallas, TX. He spends as much “off” time as he can in Traverse City, and is acutely aware of the new OZ.
Vance and his team are experts on how Opportunity Zones work, and put together a detailed presentation for potential Grand Traverse OZ investors: http://www.hmpc.com/wp-content/uploads/2019/02/HMM_Qualified-Opportunity-Zones-An-Introduction-to-a-New-Tax-Incentive-for-Investors-_VKM_edit.pdf
Don’t Miss! Opportunity Zone Event in Michigan
MSHDA is one of the partnering sponsors for Welcome to the Land of OZ: A Comprehensive Overview of Opportunity Zones in Michigan, hosted by the Community Economic Development Association of Michigan (CEDAM), from 9:30 a.m.-5 p.m., March 13, at the Kellogg Center at Michigan State University. We are pleased to work with CEDAM, Cinnaire, LISC and MEDC on this first in-depth training on OZs. The training is geared towards for-profit and nonprofit developers, Project Rising Tide communities, funders, banking industry professionals and Redevelopment Ready communities. Key topics:
- Marketing the Opportunity Zones in your community
- How to work effectively with MSHDA and MEDC
- How to secure funding for projects
- Partnering with community advocates and nonprofit organizations
- How to determine the best projects for your community
- Reasons to develop a fund
- Reasons to join forces with other funds in your region
- A structured networking session to connect with the partners you need to make your Opportunity Zone projects successful
Please visit cedamichigan.org for registration, fees, agenda and more.