New Opportunity Zones tax incentive provides powerful tool for development in Quad Cities region

Opportunity Zones, a new federal tax incentive, give the Quad Cities region a powerful tool to help spur future economic development.  Established by U.S. Congress, the Opportunity Zones incentive encourages long-term investments in communities nationwide.

Opportunity Zones provide a tax incentive for investors to re-invest their unrealized capital gains into dedicated Opportunity Funds. All of the underlying incentives relate to the tax treatment of capital gains, and all are tied to the longevity of an investor’s stake in a qualified Opportunity Fund.

Opportunity Zone tax incentives established under Section 1400Z of the Internal Revenue Code allow investors to defer, reduce and eliminate capital gains that are reinvested in qualified Opportunity Funds. These funds must hold at least 90% of fund assets in business or property located in designated Opportunity Zones:

• Temporary deferral – Investors may defer recognition of capital gains that are reinvested into an Opportunity Fund until the earlier of the time that the Opportunity Zone investment is sold or Dec. 31, 2026.
• Step-up in basis – Investors that hold their qualified opportunity fund investment for at least five years receive a 10% reduction in the original capital gain tax obligation; at seven years, the investor receives an additional 5% reduction in the original capital gain tax obligation.
• Permanent exemption – Investors that hold their qualified opportunity fund investment for 10 years will not have to pay any capital gain tax on the appreciation of the investment.

The Quad Cities region has ten Opportunity Zones – defined geographic areas – with industrial, commercial and residential investment opportunities.  The ten zones are located in Davenport, Muscatine and Clinton, Iowa, and Rock Island and Kewanee, Illinois. 

Additional local, state and federal incentives are available with the region’s Opportunity Zones.