Opportunity Zones Presented by Ryan Eustice Juan Torres

Opportunity Zones Presented by: Ryan Eustice Juan Torres

How Did We Get Here? • 2015 brainchild of EIG meant to spur development and growth in low-income neighborhoods left behind after the “Great Recession” • Established in 2017 as part of the Tax Cut and Jobs Act • Governors nominated and the Treasury Department designated 8, 700 tracts

New Mexico Selection Process • The New Mexico Economic Development Department worked with local stakeholders via county governments to submit a detailed questionnaire on eligible tracts in their area. Local stakeholders included private enterprise, economic development organizations, business organizations, councils of government, property owners/developers, tribal entities, and community organizations among others. New Mexico had 249 eligible tracts, of which, 128 were submitted for consideration. In turn, the Governor nominated to the Treasury its full allotment of 63 tracts.

What Was In The Bill anyway? • Legislation—brief and succinct, BUT • Broadly Written • Maximum Tax Benefits over 10 years • Permanent Exclusion on ROI in OZ enterprise

Opportunity Zone Businesses/Property • Must be a QOZ business when the QOF acquires equity interest and during substantially all the QOF holding period for that interest • QOZ Property- Tangible property used in a trade or business of a QOF. • Acquired by purchase after 12/31/2017 • QOF substantially improve property • Substantially all of the use of the property was in the QOZ

Qualified Opportunity Fund, The Rules: • Opportunity Funds are the critical intermediaries of investment into zones. To benefit from the incentive, investments must be made through a Qualified Opportunity Fund (QOF). • QOF decides the year the entity becomes a QOF and identifies the first month in that year to be treated as QOF (180 day rule) • QOF determines the 6 month period for the 90% asset test. • QOF picks a month after June, testing date will be last day of taxable year (last day for everyone). • What is reasonable time to reinvest from gains earned: regulations to follow.

Substantially • Substantially All- 70% • Substantial Improvement- additions to the TANGIBLE property are greater than the amount of the property beginning at the 30 month period.

Nationwide There are 8, 700 designated zones What New Mexico is doing: https: //edac. maps. arcgis. com/apps/Map. Journal/index. html? a ppid=42 eb 984 b 56634082951 a 21448 c 8189 b 3

Local Government Tools • Land Use • Planning • Knowledge • Education • Social Impact • Incentives and Community Investment • Marketing • BE READY TO PIVOT

Guidance • • Department of Treasury released rules/guidelines 10/19 • Broad • Reserved Definitions • Examples Starts the 60 day comment period • No penalty- stick to the guidelines and they change

Unanswered Questions • Will funds be able to recycle and reinvest? • Business operations? • Entrepreneurial fund manager vs large investment banks

Opportunity Funds • 100 s of funds nationwide • Wide ranging in size, investments and LOCATION • Estimates of $6. 1 Trillion • Burden is on the project to find investment

Local Funds

Thank You! Ryan Eustice 505 -827 -2191 Ryan. T. Eustice@state. nm. us Juan Torres 505 -827 -0238 Juan. Torres@state. nm. us