The Opportunity Zones program is a new economic development tool that is still in the process of being set up. In fact, the Treasury department only released the first set of rules on October 19, 2018. It arises from the Tax Cuts and Job Acts of 2017.

The program provides incentives for private investors to put some of their money into low-income areas where the poverty rate is at least 20 percent and the median family income is less than 80 percent of the regional median. New York has recommended 514 census tracts for designation as Opportunity Zones.

Opportunity Zones will be eligible for funds from designated investment funds called Opportunity Funds. Investors will receive eligibility for tax breaks as an incentive for participating.

States can designate up to 25 percent of their census tracts as Opportunity Zones. The nominations had to be made by April 20, 2018 by the Governor of the state in question. The U.S. Department of the Treasury will have final approval.

In New York, Governor Cuomo asked Empire State Development and Homes and Community Renewal to work with the Regional Economic Development Councils and make recommendations to him. The 514 recommended Census tracts represent 25 percent of more than 2,000 census tracts in the state of New York.

In order to qualify for tax breaks, an investor must invest in a qualified Opportunity Fund. Such funds much invest the majority of their assets in qualified properties in designated Opportunity Zones. The newly released rules have de facto reduced the total amount from 90 percent to 63 percent. Opportunity Funds must be organized as either a partnership or corporation for the specified purpose of participating in the program.

The program uses two incentives to attract investors. Taxpayers can temporarily defer capital gains on monies invested in designated funds. If they hold the investment for at least ten years, they can permanently exclude capital gains on the investment. This is true for purposes of filing Federal taxes. It will also positively impact New York state tax filings.

In essence, it is a means for people with money to do well while doing good. The tax breaks give investors a selfish reason for making funds available to under-served areas that have a hard time accessing necessary development funds.