Revitalizing underserved communities has been a priority of federal and state agencies for many years. In 2017, the “opportunity zones” initiative was launched under the Tax Cuts and Jobs Act.
Opportunity zones are low-income communities that can benefit from long-term investment, and Arizona has several of these. Outlined below is an overview of opportunity zones that include the potential advantages and disadvantages for real estate developers.
What are opportunity zones?
Opportunity zones generally comprise low-income urban neighborhoods, rural areas, and even tribal lands. They are areas that the government has identified as economically distressed. Government programs offer tax incentives for investors to invest in these areas. Here are some of the potential advantages and disadvantages.
Potential benefits for real estate developers
Opportunity zones offer the following advantages for developers:
- Tax advantages: Investors can reduce capital gains taxes, which makes large-scale investments in opportunity zones more viable.
- Access to new markets: Underserved areas have the potential to become brand-new markets. Land and property can be purchased for lower prices in these areas.
- Building a stronger community: Underserved communities are still full of talented and innovative people. With an improved infrastructure, investors can take advantage of this talent and foster a stronger community.
Potential drawbacks
Investing in opportunity zones may have potential drawbacks including:
- Complex regulations: There are strict requirements to follow when investing in opportunity zones.
- No guarantees: Economically distressed areas are not guaranteed to become productive. This can only happen with appropriate investments within the community.
- Resistance to change: Developments are not guaranteed to be positively received. Investors may face pushback from community members who oppose change.
Opportunity zones in Arizona are certainly something for real estate developers to consider. To find out more, it may benefit you to seek legal guidance.
