Opportunity Zones in Gilroy
Note: Due to the COVID-19 Emergency two important deadlines in the rules relating to investments in qualified opportunity zones have been extended. First, the 31-month deadline for spending cash or other financial assets held by a qualified opportunity zone business under a working capital safe harbor plan can be extended by as much as 24 additional months. Second, where an opportunity fund receives capital or proceeds from the sale of qualified property, it has 12 months to reinvest the funds before they will be counted in the fund’s 90% asset test. The fund can get an additional 12 months to reinvest the funds if the fund’s ability to reinvest is delayed by a federally declared disaster.
The passage of the Tax Cuts and Jobs Act in 2017 by the Federal Government created a new program designed to spur economic development called "Opportunity Zones". Opportunity Zones are designated census tracts that encourage investment within those areas. Investments made by individuals in these zones through Qualified Opportunity Funds would be allowed to defer or eliminate federal taxes on capital gains in three ways:
- Temporary Deferral: A temporary deferral of inclusion for capital gains reinvested into a Qualified Opportunity Fund. The deferred gain must be recognized on the earlier of the date on which the opportunity zone investment is disposed of or December 31, 2026.
- Step-Up In Basis: A step-up in basis for capital gains reinvested in a Qualified Opportunity Fund. The basis is increased by 10% if the investment in the Qualified Opportunity Fund is held by the taxpayer for at least 5 years and by an additional 5% if held for at least 7 years, thereby excluding up to 15% of the original gain from taxation.
- Permanent Exclusion: A permanent exclusion from taxable income of capital gains from the sale or exchange of an investment in a Qualified Opportunity Fund if the investment is held for at least 10 years. This exclusion only applies to gains accrued after an investment in an opportunity fund.
Gilroy has two Census tracts that are designated as Opportunity Zones; Census tracts 5126.03 and 5126.04. The interactive map below details what areas encompass both of Gilroy's Opportunity Zone Census tracts. These tracts are also qualified census tracts in the New Market Tax Credit (NMTC) program.
Now has never been a better time to invest in Gilroy's economy. If you are interested in learning more, please contact our economic development staff at 408-846-0202.