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Welcome to the Rhode Island Opportunity

The Opportunity Zones program is a new economic development tool for designated Rhode Island communities to attract private equity investment in businesses and real estate. This federal program provides a tax incentive for private investors to direct capital gains into equity investments in qualified projects within designated Opportunity Zones. The incentive is designed to encourage long-term investment - with certain tax benefits kicking in only after maintaining the investment for at least ten years.

Opportunity Zones in Rhode Island

Rhode Island Opportunity Zones are located in twenty-five census tracts spread across the following fifteen municipalities: Bristol, Central Falls, Cranston, Cumberland, East Providence, Narragansett, Newport, North Providence, Pawtucket, Providence, South Kingstown, Warren, West Warwick, Westerly, and Woonsocket. Opportunity Zones in Rhode Island have the potential to attract private investment for business expansion, startup creation, and real estate development; promote synergy with state and local efforts; and support the needs of local communities.

In April of 2018, Governor Gina Raimondo submitted to the US Department of the Treasury nominations of twenty-five census tracts in Rhode Island, the maximum permitted by law, for designation as Opportunity Zones. In May of 2018, the US Treasury certified the nominations and finalized the designations of these twenty-five census tracts as Opportunity Zones. Under federal law, the designations will remain in effect until December 31, 2028 and the designations cannot be modified. The nomination and selection process of Opportunity Zones in Rhode Island was made in consultation with stakeholders and municipalities. Only census tracts that were Low-Income Communities, as defined by 26 U.S.C. 45D(e), at the time of nomination were eligible for Opportunity Zones designation. Factors that were considered for designation as Opportunity Zones in Rhode Island included potential to attract private investment for business expansion, startup creation, development of workforce and affordable housing, and other real estate development; level of need; communities served; synergy with state and local efforts; geographic diversity; and others. Rhode Island Commerce requested, via the Rhode Island League of Cities and Towns, the help of Rhode Island municipalities in identifying eligible census tracts where private investment is most viable, would produce the greatest community benefit, and would be supported by local economic development efforts. Rhode Island Opportunity Zones include a number of transit-oriented development opportunities, colleges, universities, hospitals, ports, business incubators, and development opportunities identified by stakeholders. Twenty of the twenty-five Opportunity Zones census tracts are located in RI Health Equity Zones, a RI Department of Health program which aims to eliminate health disparities using place-based strategies to promote healthy communities. Additionally, Opportunity Zones are located in each of Rhode Island’s five Hope Communities, which represent municipalities in which the family poverty level falls below the state median and that are prioritized under Rhode Island Commerce’s programs. RI’s Hope Communities include Central Falls, Pawtucket, Providence, West Warwick, and Woonsocket.

How Do Opportunity Zones Work?

Investors can invest in Opportunity Zones through Qualified Opportunity Funds. Eligibility as an investor is broad and open to individuals and businesses, including corporations and partnerships. Investors are eligible to take advantage of certain benefits on the taxation of their capital gains:

  1. Deferral
    Capital gains that are invested in Qualified Opportunity Funds may temporarily defer capital gains taxation until the investment is sold (or, if not sold, until December 31, 2026).

     

  2. Reduction in capital gains tax for long term investments
    Capital gains that are invested in Qualified Opportunity Funds for at least five years or seven years may step up its basis, respectively, by 10% or 15%. This means $100 of invested capital gains will have $15 tax-free after keeping the investment for at least seven years.

     

  3. Exclusion of capital gains tax on appreciation of investments
    Capital gains resulting from appreciation of Opportunity Fund investments are excluded from taxation if the original investment is held for at least ten years.

     

More details and an illustrative reference on the potential tax benefits of investing in Opportunity Zones can be found here.

The Opportunity Zones program has several important features including:

  • Capital gains must be reinvested in Qualified Opportunity Funds within 180 days of the transaction that produced the gains in order to be eligible for the benefits.
  • Investments in Opportunity Zones must be made through Qualified Opportunity Funds. Other forms of investments in Opportunity Zones businesses and property will not qualify for the tax benefits.
  • Although investors have until 2026 to invest and benefit from the Opportunity Zones program, investors can maximize the benefits of the tax deferral by investing capital gains that are realized before December 31, 2019.
Links to the complete legislation and current guidance on the Opportunity Zones program can be found here.

Opportunity Zones Resources

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Rhode Island Commerce Corporation does not take responsibility for any information or resources posted here, and no information included should be considered legal or investment advice.