Flexible rules could be good for Danville’s ‘opportunity zone’
Downtown Danville’s designated “economic opportunity zone” could benefit from more flexible rules proposed for the federal tax-break program, according to Jody Lassiter, President of the Danville-Boyle County Economic Development Partnership.
“It’s going to open up a huge wealth of opportunity, not only for urban but for rural areas,” Lassiter said of the opportunity zone program Wednesday.
In October, the IRS proposed regulations for the country’s recently created opportunity zones. There are around 8,700 such zones designated across the country, covering approximately 12 percent of all U.S. census tracts, according to an article in Forbes by Steve Rosenthal with the Urban-Brookings Tax Policy Center.
“The guidance is favorable to investors, giving them flexibility and certainty without requiring them to document or demonstrate the value of their tax-subsidized deals,” Rosenthal wrote in October. “But the jury is still out on the social benefits of these investments.”
The opportunity zones were made possible through a provision of the Tax Cuts and Jobs Act of 2017. Rosenthal wrote that the opportunity zones were previously projected to cost the federal government around $1.6 billion over 10 years. But “… the generous rules in the proposed regulations would likely add substantially to the incentive’s long-run cost.”
Danville’s opportunity zone covers the downtown area south of Lexington Avenue and west of Stanford Road; it extends south to Clark’s Run and west to the Norfolk Southern railroad. It’s one of 144 zones created by Gov. Matt Bevin in April.
“The designation offers significant federal tax breaks and deferrals to entities and individuals investing in opportunity funds, which support development projects within one or more zones,” according to a news release from the governor’s office.
According to Rosenthal, capital gains such as profits from stock market investments can be put into opportunity funds that are used to invest in opportunity zones. Taxes are delayed and in some cases eliminated, depending on how long the investment is made.
Lassiter said Danville could potentially attract a long-sought-after downtown hotel thanks to its opportunity zone. It’s also possible the zone could benefit Ephraim McDowell Health or Centre College, he said.
“It may result in partnerships in which private investors through the opportunity zone funds build facilities for Ephraim’s further expansion, or maybe another residential facility …. and those would be long-term leased,” Lassiter said. “That would be a new approach for both Ephraim McDowell, as well as Centre College.”
Lassiter said he expects the rules for opportunity zones will be finalized in the spring, at which point investments could begin to be made. In the meantime, the EDP is creating a “prospectus” of possible projects inside the zone, with which it hopes to entice investors, he said.
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