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‘Opportunity zones’ seek to bring new life to distressed areas

| Nov 23, 2018 | commercial real estate |

City and state officials are working to turn run-down, low-income sections of downtown Louisville into thriving business districts. They want to encourage long-term investment in these areas. This involves creating “opportunity zones.” By designating areas as opportunity zones, those who invest in property there are eligible for significant tax breaks.

As one Louisville developer says, the tax breaks are designed to encourage investors to stay in these areas for a long time, and not to “flip and flee.” The longer they remain invested in a property, the more tax benefits they’ll see.

The way it works is that if someone buys a building for a relatively low price and puts far more than that initial purchase price into making improvements in the building, they aren’t taxed on the amount they’ve spent on improvements for a number of years. If they keep the property long enough, they’ll pay less in taxes on their capital gains when they eventually sell it.

The opportunity zones aren’t just aimed at attracting local investors, but people from throughout the region and even from other parts of the country. As the developer notes, “We have a great city, but you’re only as strong as your most challenged areas.”

One tax attorney notes that these “substantial” incentives not only benefit investors financially, but improve the community. He says the opportunity zones are “intended to improve areas that are…financially distressed, don’t have as much in the way of development projects going on and don’t have many businesses offering employment. The project and the program is designed to encourage that.”

All commercial real estate transactions can have unforeseen issues and complications. When investing in property that’s going to require significant upgrades, these complications can be significant. It’s wise to have an experienced Louisville commercial real estate attorney on your team to offer guidance and work to protect your interests.