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Opportunity Zones News Briefs – July 2019

Puerto Rico Gov. Ricardo Rosselló May 14 signed legislation creating additional territorywide incentives for investments in opportunity zones (OZs). S.B. 1147 will provide a 25 percent tax credit, a reduction in tax on the net income of exempt businesses, a 25 percent exemption from property taxes and construction taxes, conformity to the federal tax code for OZ investments and more.

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The California State Senate May 23 passed S.B. 25, a bill that would streamline environmental review and approval for developments, including those funded by qualified opportunity funds (QOFs). The Senate advanced the legislation to the Assembly on a vote of 28-6, with four senators not voting.

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Legislation was reintroduced mid-May in a special session of the West Virginia Legislature that would allow individuals and partnerships or members of limited liability companies to exempt from state tax liability their net income directly derived from a qualified OZ businesses in the state. H.B. 113 is a variation on legislation that Gov. Jim Justice vetoed earlier this year for technical considerations. H.B. 113 would go into effect for taxable years beginning Jan. 1, 2019, and will terminate for taxable years beginning Jan. 1, 2024. The new legislation failed to get enough support to suspend state constitutional rules requiring it be read on three separate days, delaying a vote.

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Alabama legislation to give state taxpayers a capital gains tax reduction for certain OZ investments passed the state Senate and House of Representatives May 30 and went to the desk of Gov. Kay Ivey. H.B. 540 would allow a state capital gains tax reduction if the gains are invested in a QOF that has at least 75 percent of its qualified OZ property in the state. The bill also includes a provision to allow the Alabama Department of Economic and Community Affairs to enter into agreements with QOFs to offer impact investment tax credits to investors in case the projects undertaken by the QOF don’t produce returns by the fifth year that were expected in the project agreement. There is a statewide cap of $50 million for credits, with a requirement that “extraordinary returns” are allocated back to the state.

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California Gov. Gavin Newsom’s updated 2019-2020 budget request May 9 includes a provision to partially conform state tax laws to the federal tax code for the OZ incentive. Newsom’s budget request would make OZ investments in green technology and affordable housing match federal benefits for capital gains reduction and deferral. A previous budget request included complete conformity to the federal tax code. The California Legislature must pass a budget by June 15.

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Maryland Gov. Larry Hogan signed legislation April 30 to expand state tax incentives to OZs and extend the state Historic Tax Credit (HTC) program through 2024. S.B. 581 makes qualifying businesses and property in OZs eligible for the More Jobs for Marylanders program and certain tax credits. The bill also allows local jurisdictions to offer property tax credits for vacant OZ properties that are put back into use and makes other credits available through the Department of Commerce. The legislation extends the state HTC expiration date from the end of 2022 to the end of 2024 and creates a set-aside for HTC properties in OZs.

Journal Category:

Opportunity Zones

Authors:

Novogradac

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