While many New Jersey residents are still cursing revamped federal tax rules that cap a longstanding write-off for local property taxes, state leaders are hoping another element of the federal overhaul — one that creates incentives for investing in low-income areas — will boost community revitalization efforts.
Parts of 75 New Jersey communities have now been designated as “opportunity zones” under an economic-development program created by the federal tax legislation signed into law late last year by President Donald Trump.
That designation means investors will be able to earn tax breaks for buying stakes in real estate or companies that are taking root in communities where the new opportunity zones have been established. Sections of some of New Jersey’s biggest cities, like Newark, Camden, and Paterson, have qualified for these opportunity zones. But swaths of other communities throughout the state like Bound Brook, Bridgeton, Plainfield, and Willingboro are also in the program.
Some of the rules are still being written by federal regulators, but business leaders are working hard to make sure investors know that New Jersey could be a prime location for opportunity-zone investments. As part of that effort, Gov. Phil Murphy and U.S. Sen. Cory Booker (D-Newark) participated yesterday in a forum organized by Choose New Jersey, a nonprofit business promotion group, to draw more attention to the new tax incentives.
“This is a gamechanger,” Murphy said during the event, which drew some 200 potential investors and business leaders.
Earlier this year, Murphy sought toas many as a quarter of the state’s eligible low-income census tracts, a total of 169 tracts, after the opportunity zone program was created, which also cut rates for individuals and businesses, and capped the longstanding write-off for state and local taxes known as .
To qualify as an opportunity zone, a census tract — typically a section of a town or a small municipality — generally must have a poverty rate of 20 percent or a median family income of up to 80 percent of the area median. In all, parts of 75 different communities in New Jersey were qualified by the federal government as opportunity zones.
The new federal tax code gave governors the authority to submit communities for approval as opportunity zones using census tracts, and earlier this year Murphy asked for169 low-income census tracts in New Jersey to be included in the program. “I’m proud to say, we jumped on this early,” Murphy said.
On the investor side, an opportunity zone allows someone to benefit directly by waiving their tax liability if they invest in a company in the zone and then sell their stake for a profit after staying in it for 10 years or longer. The new federal program also allows investors to benefit by rolling over capital gains from other investments into an opportunity-zone investment rather than waiting for the right time to simply report those gains on their taxes, providing as much as a 15 percent tax break if they stick with the opportunity-zone investment for at least seven years. And their investments can be done individually, or through a special fund that can be set up to coordinate investments in a specific opportunity-zone community.
Booker — who cosponsored the bipartisan legislation that led to the program’s creation — suggested the new tax breaks have the potential to grow the state’s economic base by directing capital that now is sitting on the sidelines to locations that don’t often generate investor interest. He also pointed to a “multiplier effect” that the new investments could generate if they become successful and draw more interest from other investors to a revitalizing community.
“Ten to 15 years from now — it’s not only something we’re going to be proud of — but think of how much money that is going to be going into the Treasury,” Booker said during yesterday’s event.
Among those attending the event was Michele Siekerka, president and chief executive of the New Jersey Business & Industry Association. She said her organization views the new program as a “great opportunity for public-private partnerships.”
“While the success of the Opportunity Zone program may ultimately depend on private investment commitment in each community, we feel strongly it can be an effective economic development tool that will help small businesses grow and create private sector jobs in some of the state's most economically challenged cities,” Siekerka said.
But in the wake of the program’s creation, some have questioned whether it will ultimately benefit only developers or end up incentivizing gentrification efforts that muscle out an opportunity zone’s existing residents and businesses. Murphy stressed during a Q&A period with reporters held after the event yesterday that the new program is designed to work for investors, and also for “the folks who fought and stayed” in the communities now designated as opportunity zones.
Booker also said that local officials will continue to control the types of projects that win approvals in their communities to ensure they comply with any local hiring or zoning restrictions. The new law, which is being administered by the U.S. Department of Treasury, also requires any investments in the opportunity zones to last for either seven or 10 years before the investor yield any tax benefits, he said.
“This means that you’re not just going to come in to get a tax gain, and then move your capital along,” Booker said. “You’re going to be part of that community and investing in that community.”
|Egg Harbor City||Somers Point|
|Egg Harbor Township|
|Cape May||Wildwood||Lower Township|
|Jersey City||West New York|
|Monmouth||Asbury Park||Neptune City|
|Freehold Borough||Neptune Township|
|Long Branch||Red Bank|
|Passaic City||Prospect Park|
|Salem||Carney's Point||Salem City|
|Somerset||Bound Brook||North Plainfield|