Seizing the opportunity: job growth sought in Boyd and Greenup
Wednesday, June 05, 2019
Article by Julianna Leach / THE DAILY INDEPENDENT
Nearly 70 investors, bankers, business owners and members of the community gathered Tuesday to set their sights on learning about options within Opportunity Zones during a comprehensive seminar at the Highlands Museum and Discovery Center.
Opportunity Zones are federally designated areas in which investors and entrepreneurs can pursue business opportunities and receive significant tax breaks.
The event was hosted by Northeast Kentucky Development. The forum explained the technical side of how Opportunity Zones work as well as their relation to Kentucky’s recent P3 statute and the Tri-State Angel Investment Group.
“Opportunity Zones are completely different to what anyone has really worked with before,” said Sam Howard of Northeast Kentucky Development. Howard has helped develop a master plan for property on an Opportunity Zone in South Shore Industrial Park.
The Tax Cuts and Jobs Act of 2017 went through Congress with the goal of furthering economic development in rural and low-income areas. It was left up to state governors to select the zones in their states. The Ashland Alliance played a role in determining the Opportunity Zones for Boyd and Greenup Counties.
“Very early on we were contacted by the state of Kentucky and asked to give info when they were creating the opportunity zones,” said Tim Gibbs, chief executive officer of Ashland Alliance. “But opportunity zones are simply a way to link projects to available capital.”
The three locations are a section of downtown Ashland, EastPark industrial Center and a section of riverfront in Greenup County.
“I think this will lead to some investment and more businesses moving in,” said Greenup County Judge Executive Bobby Carpenter.
The way an Opportunity Zone (OZ) works is for investors to take advantage of a qualified opportunity fund (QO), which is a partnership between an investor and a small business.
Gains from real estate, stock or a recently sold business were originally always taxed but with the new OZ law, that gain can roll over and be invested in an QO fund that has new tax incentives.
“This law has never existed in a tax code as it currently stands, so what really intrigues clients is the tax-free piece if they hold it for 10 years,” said Stephen Lukinovich, from MCM CPAs and Advisors.
The investor will gain federal tax incentives like a temporary deferral of taxes under a certain criteria, reduction of deferred gain and eventually a capital gain that they can elect to exclude past the original amount invested after 10 years.
Leaving anything gained past that point untaxed.
“This is not a get rich quick scheme — this is a get rich slow scheme but that means that’s good because that means the money stays here,” said Eric Dobson from the Tri-State Angel investing Group.
Attorney Mike Shull said Kentucky’s P3 statute — which allows for public-private partnership — overlaps with that of OZ. So, private sectors can make an unsolicited proposal to state or local entities’ to privately fund improvements in infrastructure.
Now, local entities could have more options when it comes to needs like office spaces, city hall buildings and more.
“What’s happened is we’ve really taking a big leap forward,” said Shull, from Frost Brown Todd Attorneys LLC. “It can even be more creative than that. It could be waste water and sewer.”
The locations for these types of buildings could be targeted towards Opportunity Zones, which would solve the public’s needs while providing returns to the private investor.
Currently the amount of people using the new P3 RFP’s is less than what Frost Brown Todd Attorneys had hoped for.
Dobson said those with businesses located in OZs outside of just the real estate aspect have potential to investors.
“If you’ve got a business in an opportunity zone that has growth potential there are investors out there looking for those opportunities,” said Dobson.
Howard said Opportunity Zones are not miracles and are not expected to be a fix all solution to previous problems.
“If it’s not a good investment, putting it in an Opportunity Zone will not make it a good investment,” said Howard.
More information on Opportunity Zones in Kentucky can be found at www.kyoz.org.
Category: Opportunity Zone, News