Investing in Distressed Communities Through Louisiana's Opportunity Zones

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Established by Congress in the Tax Cuts and Jobs Act of 2017, Opportunity Zones are a community development program. This new federal capital gains tax incentive program is designed to drive long-term investments to low-income communities. The new law provides a federal tax incentive for investors to re-invest their capital gains into Opportunity Funds, which are specialized vehicles dedicated to investing in designated low-income areas.

Eligible taxpayers who invest capital gains into a Qualified Opportunity Fund (QOF) can defer paying federal capital gains tax until the QOF is sold or exchanged, or until December 31, 2026.

To qualify for deferral, capital gains must:

  • Be invested in the QOF within 180 days from the sale of an asset

  • Be an equity interest (not a debt interest)

  • Elect deferral by filing the appropriate tax forms the year the gain would otherwise be included as income

Investors can receive up to three primary tax benefits for investing capital gains into a QOF:

  • Temporary Deferral – The tax payment is deferred until the investment is sold or exchanged, or until December 31, 2026 (whichever comes first).

  • Partial Exclusion – If the QOF investment is held for longer than five years, there is a 10 percent exclusion of the deferred gain. If held for more than seven years, the exclusion becomes 15 percent.

  • Elimination – If the QOF investment is held for at least 10 years, the investor has the potential to eliminate any tax payment.

According to Louisiana Economic Development (LED) 150 census tracts in Louisiana that are qualified opportunity zones. These low-income tracts were nominated by Gov. John Bel Edwards and certified by the Secretary of the Treasury.

Louisiana’s 150 tract recommendations were determined based on a strategic review of feedback from local, state and federal elected officials; economic and community development organizations; private developers; private equity firms; non-profit organizations; churches; and individuals. LED’s extensive review and comprehensive analysis considered the following factors:

  • the potential for development based on known certified sites, tracts of land, or buildings within the eligible census tract

  • proximity to regional assets (ports, airports, industrial parks, tech parks, colleges and universities, etc.)

  • opportunities to leverage other designations such as NMTC or Enterprise Zones

  • that coverage included a mix of tracts - some with high potential for economic development and others with high potential for community development (e.g. affordable housing, redevelopment, mixed use real estate, and any other types of quality of place enhancements)

  • the end goal to ensure a fair and balanced distribution of zones across each of the eight economic development regions of the state

  • the end goal to ensure adequate coverage in both rural and urban areas.

    As with any real estate transaction, title and closing services will be essential to these properties. Homestead Title is ready to assist investors with their title and escrow needs. To find out more about our title insurance and closing services, call us at 504) 581-6427.