Report Prepared by: Frank Quintero, Director of Economic Development
Title
SUBJECT: Report to the City Council on Economic Opportunity Zones
REPORT IN BRIEF
Presentation to the City Council on the Opportunity Zone program created by the 2017 Federal Tax Cuts and Jobs Act.
RECOMMENDATION
Information-Only.
Body
DISCUSSION
Opportunity Zones (OZs) are a new investment tool created by the 2017 Federal Tax Cuts and Jobs Act to stimulate investment and economic development in low-income communities. The program offers capital gains tax benefits in exchange for making investments in Opportunity Zones that can spur business and economic growth.
Selecting Qualified Census Tracts
In March 2018, the State of California released its list of Qualified Census Tracts for comment by local jurisdictions. In June 2018, the U.S. Treasury Department evaluated and designated over 8,700 low income census tracts in U.S. States and Territories as Opportunity Zones for a 10 year period, until 2026. Within the State of California, there are 879 such zones. The Merced City Opportunity Zone is composed of 7 qualified census tracts totaling 6,680 acres (ATTACHMENT 1). Portions of the census tracts are located within Merced County.
To be eligible for nomination, census tracts had to have poverty rates of 20% or higher, or median family incomes below 80% of statewide or metro area median family incomes. Each State or U.S. Territory could nominate up to 25% of their eligible census tracts, and up to 5% of those nominated census tracts could be in areas that were contiguous with low-income community census tracts.
The OZ Benefits
The key benefits of an Opportunity Zone designation are businesses and projects in the zone are eligible for investments from a new source of funding called Qualified Opportunity Funds, and investors are eligible for new tax benefits in exchange for investing in such funds.
Investments made by individuals through Qualified Opportunity Funds in designat...
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