25 North Dakota Opportunity Zone offers investment incentives
JAMESTOWN, N.D.—Economic development officials are looking at the newly announced Opportunity Zones as a chance for people to invest in local communities and shelter some income from capital gains tax.
Gov. Doug Burgum announced Friday, April 20, the designation of 25 zones in 15 counties in North Dakota.
The Opportunity Zone program was part of the 2017 Tax Cuts and Job Act approved by Congress and signed by the president. All the states were allowed to specify areas that would participate in the program.
The list of Opportunity Zones can be found at www.business.nd.gov/finance/TaxIncentives/OpportunityZonesIncentive/.
Five Opportunity Zones were designated in Fargo and three each in Bismarck and Grand Forks. Others included one covering most of southern and western Valley City, an area that included much of downtown and southern Jamestown and all of Ellendale in Dickey County.
"We're competing with all 50 states," said Connie Ova, CEO of the Jamestown/Stutsman Development Corp. "Our greatest opportunity will be with local investors."
The Opportunity Zone program offers a deferment or exemption for capital gains taxes if the profits of a sale are invested in an approved Opportunity Zone. Ova said a landowner who sold property at a profit could avoid the capital gains tax by investing in projects within an Opportunity Zone, for example.
"I think there are people faced with capital gains taxes," said Jennifer Feist, director of development at Valley City-Barnes County Development Corp., speaking of local investors who might benefit. "Those people can invest in the community rather than pay the federal tax."
While the basic makeup of the program is known, the details are still being developed, according to John Schneider, director of the economic development and finance division of the North Dakota Department of Commerce.
"This really is a federal program," he said. "The state's main responsibility was designating the tracts for the zones."
The U.S. Treasury Department will set the guidelines which Schneider hopes will be done soon. The next step would be to establish Opportunity Zone funds to accept investments from people with potential capital gains tax. Those funds would then invest the money in projects within the approved zones.
"The regulations for that are still being worked out," Schneider said.
Schneider said the state of North Dakota may operate a fund through the Bank of North Dakota, although other funds may also form.
Ova said economic development officials are also waiting for more information on the types of projects that will be eligible.
"At this time we don't know project specifics," she said. "In the end, it has to be something with a return on investment."
Don Frye, economic development director for Ellendale, said that community may have a project ready.
"We have an apartment complex for sale," he said. "This type of program might help because there is a significant amount of money necessary to buy and rehab the property."
Feist said ideas for projects may have to come first before the funds would be able to attract investments.
"It's a chicken and an egg thing," she said, referring to whether the investor or project comes first, "but it doesn't start without a good idea."
Feist said she was optimistic the Opportunity Zone might help with economic development in the area if the right projects can be found.
Ova said the Opportunity Zone program could play a part in possibly attracting a major factory ot housing development to Jamestown, although there are still many details to be worked out.
"We have a lot of ideas and a lot of questions right now," she said.