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Opportunity zones present a tax break for investors in impoverished and rural areas

OPPORTUNITY ZONE: Several areas in the metro Jackson area have been designated Opportunity Zones. Photo by Steve Wilson

The Tax Cuts and Jobs Act of 2017 authorized a new tax break to spur development in certain designated areas nationwide that are considered to be impoverished.

To use the tax break, investors will have to provide capital for areas that were nominated by the state government and approved by the U.S. Secretary of the Treasury as opportunity zones. There are 100 of these in Mississippi, according to the latest list released by the U.S. Internal Revenue Service.

To qualify, a census tract had to have a poverty rate of 20 percent or greater and/or family income that is less than 80 percent of the area's median income. States could nominate up to 25 percent of the total number of eligible low-income areas in the state and 57 percent of the nation's neighborhoods met the nominating criteria.

To use the tax break, a taxpayer would have to file a form with the IRS that certifies a fund, called the Qualified Opportunity Fund, that is earmarked for use in investments in the opportunity zone.

The fund can be a partnership or a corporation and acts a vehicle for investing in property located in an opportunity zone. These are funded by using gains from previous investments. Investors aren't required to live in the opportunity zone to qualify.

A map of these opportunity zones can be found here.

A report released in April by the Washington D.C.-based public policy group, the Brookings Institution, criticized the areas chosen by leaders in Mississippi, Idaho and South Dakota. The report says the program could act as a tax break for those investing in already-gentrifying areas.

The study singled out Mississippi as selecting areas as opportunity zones that had lower average and child poverty rates, had better education outcomes and had smaller minority populations than some low-income areas that weren't recommended by state leaders for the program. The report said that out of 37 relatively good neighborhoods that were eligible in Mississippi under the program, 21 were selected.

According to Brookings, 82 percent of Mississippi neighborhoods were eligible for the program.

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