Opportunity zones were created in the 2017 Tax Cuts and Jobs Act to help economically distressed communities benefit from a capital gains tax incentive. The Governor from each state nominated economically distressed areas (census tracts) based on the following low-income requirements as defined by U.S. Internal Revenue Code Section 45D(e).
Up to 25% of census tracts of each jurisdiction that met this criteria could be nominated. An additional 5% of each jurisdiction could quality if the met additional income and geographic requirements:
On March 21, 2018, Governor Abbott designated 628 census tracts in Texas as Opportunity Zones, which were later certified by the U.S. Department of Treasury on April 18, 2018. Within Amarillo, there is 1 designated tract that covers downtown Amarillo along with part of the Barrio Neighborhood Plan area. Qualified Opportunity Funds can invest in a multitude of eligible real estate and operating business projects. Investors should refer to the IRS Frequently Asked Questions and Department of Treasury regulations for more information.
Interactive Online Map for Amarillo
The City of Amarillo has 1 Census Tracts eligible for Opportunity Fund investments:
Census Tract 154.00
Assets within the zone include:
- Barrio Neighborhood Plan (North of Interstate 40)
- Downtown (north of SW 11th St & south of the railroad)
- Infrastructure in or near zone – highway access, rail, air, water, sewage
- You sell a building for $2 million with $1 million capital gain. $150K capital gains tax are due (15% tax rate).
- You deposit $1 million capital gain into Qualified Opportunity Zone fund which is used to purchase real estate, partnership interest, or equity in an existing business inside Opportunity Zone Census Track. $150K capital gains tax is deferred.
- Hold the asset inside the Qualified Opportunity Fund for 5 years cost basis is reduced by 10% capital gain tax is reduced by 15K; Hold for 7 years cost basis is reduced by 15% capital gain tax reduced by 22.5K
10 Year Sell
- After 10 years asset is now sold for $2 million ($1 million capital gain); pay no capital gains tax on $1 million.
Total Tax Savings at 10 years $172.5k: $22.5k (savings from original $1 million capital gain) plus $150K (savings from $1 million capital gain of Qualified Opportunity Fund)
Dec. 31, 2019 – Last day to invest in Qualified Opportunity Zone Fund to recognize maximum program benefits
Dec. 31, 2021 – Last day to invest in Qualified Opportunity Zone Fund to realize a 10% Step-Up in Basis
Dec. 31, 2026 – Forced recognition of capital gains invested into Qualified Opportunity Zone Funds
Dec. 31, 2028 – Federal designation of Opportunity Zones expires
There are a number of online resources to learn more about Opportunity Zones. Please find below links to the IRS, U.S. Department of Treasury and the Economic Innovation Group Opportunity Zones resources.