I’d heard a few mentions of “Opportunity Zones” over the last few months, but didn’t pay much attention – I was thinking “yet another tax incentive that’s probably too restrictive to bother with”. Last week, they came up in two separate meetings (where we learned the details), and then on Thursday Fred Wilson wrote about them in his blog. Turns out they could be pretty significant for startups and investors, and as NC IDEA devotes more time and funds towards under-resourced entrepreneurs in North Carolina, something that we will be learning more about.
Opportunity Zones are low income census tracts. Governors can nominate up to 25% of all the tracts in a state – by limiting the number, it increases the likelihood of concentrating capital and creating meaningful economic development. Opportunity Funds invest in businesses in these tracts and have several incentives to do so: temporary tax deferral, step-up in basis for capital gains reinvested as an Opportunity Fund, and an exclusion of capital gains.
Here are a few places to learn the details: