There are four designated Opportunity Zones in Southwest Louisiana. Each of these areas provides investors, property owners, government and business leaders a pathway to impact and improve struggling communities in our area realizing a tax benefit.
An Opportunity Zone is defined by the Internal Revenue Service as “an economically distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment.”
Large sections of DeRidder, Jennings, Lake Charles, and Oakdale obtained Opportunity Zone certification after Louisiana Gov. John Bel Edwards — along with 49 other governors — provided President Trump’s administration with a list of regions around the country that needed assistance to stimulate economic development.
The Opportunity Zone program was added to the tax code by the Tax Cuts and Jobs Act that was signed into law in 2018.
Within these Opportunity Zones, investors have the chance to utilize their capital gains to spark the development of hotels, shopping centers, restaurants, grocery stores, hospitals, urgent care facilities, and multi-family housing.
Some program highlights
What are Opportunity Zones?
• Investors sell off assets and generate capital gains.
• Capital gains are moved into a qualified opportunity fund.
• Funds can be used on the following types of projects: stocks of companies located in opportunity zones, partnership interest in qualified business and business property located in a zone.
How Do Opportunity Zones Work?
• Tax deferral on gains rolled into an opportunity fund (until 2026 at the latest).
• Tax reduction: five years total 10 percent; seven-year total 15 percent.
• Tax exclusion: on the appreciation of investment if held for 10 years.
During a Louisiana Economic Development sponsored seminar in Alexandria last week, representatives with KPMG, an international audit, advisory and tax service company, provided insights into the usage of Opportunity Zones by investors. KPMG’s team explained that right now an education process needs to be undertaken.
“There is a huge interest in Opportunity Zones. But there is a big mystique around them because it is a tax program. Many investors don’t know where to start because there is not enough information for them to have initial conversations,” said KPMG’s David MacNamara.
His cohort, Joe Scalio, explained that once the insidesand-outs of Opportunity Zones are understood, “this program and the tax benefit will be transformational for communities.”
The Southwest Louisiana Economic Development Alliance/Chamber SWLA has hosted several groups since the program started, in an effort to discuss Opportunity Zones. At that time, there were many questions about the program which had not been resolved by the federal government. We are happy that many more answers are available to potential investors now.
The Alliance/Chamber SWLA will work in tandem with local, state and federal agencies and financial professionals to market our Opportunity Zones to potential investors.
We need access to individuals and groups who are interested in development potential within these zones to share as much information as possible. Also, we want to talk to investors who want to benefit from this tax reduction/exclusion tool.
Opportunity Zones provide qualified investors the possibility of building wealth, reducing their tax burden, and helping their community at the same time.
Residents living in the Opportunity Zones of DeRidder, Jennings, Lake Charles and Oakdale deserve the chance to benefit from investments and realize an improved quality of life and economic prosperity.