Opportunity Zones - An Incentive to Invest in Lower-Income Areas
What is an Opportunity Zone?
The federal Tax Cuts and Jobs Act of 2017 was signed into law on Dec. 22, 2017. The Opportunity Zone program was included in that act, which was designed to provide tax incentives to investors who fund businesses in underserved communities.
Investors are able to defer paying taxes on capital gains that are invested in Qualified Opportunity Funds that in turn are invested in distressed communities designated as Opportunity Zones by the governor of each state. Up to 25 percent of the low-income census tracts in each state can be designated as Opportunity Zones.
Which Tracts in Washington are Designated as Opportunity Zones?
Tracts Designated as Opportunity Zones
| County | List of Designated Tracts |
|---|---|
| Adams | 53001950200 |
| Asotin | 53003960300 |
| Benton | 53005010901, 53005011300 |
| Chelan | 53007961000, 53007961100, 53007961200 |
| Clallam | 53009000200, 53009000300, 53009000400, 53009000700, 53009000800, 53009000900, 53009001500, 53009002100, 53009002300, 53009940000 |
| Clark | 53011040507, 53011040509, 53011041009, 53011041600, 53011042400, 53011042500, 53011042600 |
| Columbia | 53013960200 |
| Cowlitz | 53015000300, 53015001100 |
| Douglas | 53017950300 |
| Ferry | 53019940000, 53019970100, 53019970200 |
| Franklin | 53021020100 |
| Garfield | 53023970300 |
| Grant | 53025010800 |
| Grays Harbor | 53027000200, 53027001000, 53027001500 |
| Island | 53029970700 |
| Jefferson | 53031950202, 53031950400, 53031950601, 53031950702 |
| King | 53033008600, 53033008700, 53033009000, 53033009100, 53033009200, 53033009300, 53033009400, 53033011001, 53033011101, 53033011800, 53033026100, 53033026801, 53033026802, 53033027200, 53033027300, 53033027900, 53033028000, 53033028100, 53033028200, 53033028402, 53033028403, 53033028802, 53033030006 |
| Kitsap | 53035080500, 53035092200, 53035092300 |
| Kittitas | 53037975500, 53037975600 |
| Klickitat | 53039950100, 53039950200 |
| Lewis | 53041971000, 53041971100 |
| Lincoln | 53043960400 |
| Mason | 53045960600, 53045961300 |
| Okanogan | 53047940100, 53047940200, 53047970400, 53047970800 |
| Pacific | 53049950200, 53049950300, 53049950800 |
| Pend Oreille | 53051970200, 53051970500 |
| Pierce | 53053061400, 53053061601, 53053061602, 53053062400, 53053062600, 53053071408, 53053071409, 53053071503, 53053071805, 53053071806, 53053072000, 53053940007 |
| Skagit | 53057940500, 53057951500, 53057952200, 53057952401, 53057952500 |
| Skamania | 53059950300, 53059950400, 53059950500 |
| Snohomish | 53061040200, 53061040700, 53061041901, 53061051400, 53061052803, 53061053509, 53061053700 |
| Spokane | 53063000200, 53063001600, 53063002300, 53063002400, 53063003100, 53063003200, 53063003500, 53063004000, 53063010401, 53063014400, 53063014500 |
| Stevens | 53065941000, 53065950800 |
| Thurston | 53067010100, 53067011200, 53067012320, 53067012720 |
| Walla Walla | 53071920300, 53071920500 |
| Whatcom | 53073000600, 53073001000, 53073940000 |
| Yakima | 53077000100, 53077000200, 53077001300, 53077001501 |
How Many Zones Were Created?
The governor of each state could designate up to 25 percent of the total number of eligible census tracts as Opportunity Zones. In Washington, this came out to a total of 139 tracts.
Nominated Tracts Had to Meet Specific Criteria
Low-income community census tracts were the basis for determining eligibility for Opportunity Zones. A low-income community census tract needed to have an individual poverty rate of at least 20 percent or median family income up to 80 percent of the area median in order to qualify.
How did Washington Decide Which Areas to Designate as Opportunity Zones?
Governor Inslee directed Commerce to develop a procedure for nominating tracts. Commerce consulted with a diverse group of stakeholders, and as a result, set the following goals:
- Transparent process
- Created a process that helps strengthen communities
- Created ability for tribes to directly access some portion of the available census tracts
- Created ability for each county, in conjunction with the applicable associate development organization (ADO) to access some portion of the available census tracts
- Created a competitive portion of tracts that were awarded to areas that would most likely result in new investment and job creation.
To accomplish these goals, Commerce requested that cities, towns, counties, tribes, associate development organizations, port districts and housing authorities nominate tracts through one or more of the following three options.
Opportunity Zone Pools
| County/ADO Set-Aside: up to 69 tracts total | Each county, through the applicable ADO, may nominate a certain number of eligible census tracts within the county for designation. The number of tracts per county is allocated based on the total number of eligible tracts in the county, and is shown in Appendix A. Counties will receive a minimum of one and a maximum of five tracts through this formula. If fewer than 69 tracts are nominated, any remaining tracts will be added to competitive process. |
| Federally recognized Tribe Set-Aside: Up to 29 tracts total | Each of the state’s federally recognized tribes may nominate one eligible census tract for designation. The tract may, but need not, include lands owned or controlled by the nominating tribe. If fewer than 29 tracts are nominated, any remaining tracts will be added to the competitive process. |
| Competitive Process: 31 or more tracts (total will depend on the number of set-aside tracts that are returned to the competitive pool) | Eligible entities (cities, towns, counties, tribes, ADOs, housing authorities, and port districts) may submit applications to nominate tracts for designation based on criteria specified below. Each application may nominate as many as three tracts, and entities may submit more than one application. A review team will score each application, and the top-scoring areas will be nominated for designation. |
Find Out More About Opportunity Zones in Washington State
To find out more about Opportunity Zones in Washington State:
By street address: This US Department of Treasury CDFI Fund link allows you to determine if an address is in an Opportunity Zone and/or a New Markets Tax Credit eligible area. Make sure that only the “Opportunity Zones” box is checked in the “Layers” tab.
How Does the Opportunity Zone Program Work?
The law passed by Congress in December of 2017 states:
- Qualified Opportunity Zones must be certified by the U.S. Department of the Treasury and are required to hold at least 90 percent of their assets in qualified opportunity zone businesses and/or business property.
- To qualify, capital gains must be invested in a Qualified Opportunity Fund within 180 days of the date of the sale or exchange that generated the gain.
- The tax deferral is temporary (up to nine years) and the program ends on December 31, 2026.
Today, the U.S. Department of the Treasury and the IRS released proposed regulations on Opportunity Zones designed to incentivize investment in American communities. The Treasury Department plans on issuing additional guidance before the end of the year after notice and comment.
Additional information:
- Proposed implementation regulations (click here)
- List of Qualified Opportunity Zones (click here)
- Frequently asked questions (click here)
The IRS has released the second round of Opportunity Zone regulations. Click here for more information.
DISCLAIMER: The U.S. Department of the Treasury has not completed its rulemaking on the Opportunity Zone program.
News and Events
For the latest on Opportunity Zones in Washington State, check out this page.
The White House announced Dec. 12, 2018 that the president will sign an executive order creating a White House Opportunity and Revitalization Council to support investment in opportunity zones
Read the New York Times article
Seattle Conference offered opportunities for communities to learn more about Opportunity Zones
Presentations
NEW: IRS Issues Draft Regulations
On. Oct. 19, 2018 the U.S. Department of the Treasury and the IRS released proposed regulations on Opportunity Zones designed to incentivize investment in American communities. The Treasury Department plans on issuing additional guidance before the end of the year after notice and comment.
Additional information::
- Proposed implementation regulations (click here)
- List of Qualified Opportunity Zones (click here)
- Frequently asked questions (click here)