New Jersey Gov. Phil Murphy submitted recommendations of the Opportunity Zones on Thursday to the United States Department of the Treasury.
The Opportunity Zones program was enacted as part of the 2017 federal Tax Cuts and Jobs Act and is designed to drive long-term capital investments into low-income rural and urban communities. Murphy’s statement on the state’s jumping into the program was eagerly anticipated.
“New Jersey is committed to using every tool at our disposal to develop our communities and grow our economy,” Murphy said. “This program provides real opportunity for our state that has the potential to create significant, long-term economic development in the communities that need it the most.”
The federal program was launched in December in connection with assorted tax reforms. It allows for unrealized capital gains to be reinvested in Opportunity Funds aimed at low-income communities – known as Opportunity Zones – in exchange for a diminishing tax on capital gains over the lifespan of the investment.
According to the Economic Innovation Group – the organization overseeing the Opportunity Zone program – states must designate tracts as Opportunity Zones for which Opportunity Funds can be formed and used. In New Jersey, there has been recent surge in developer interest in the program—and whether Murphy would allow the state to participate in the program.
Once state officials have designated each zone and a fund has been arranged, investors have access to three tax incentives on unrealized capital gains through the Opportunity Funds: a temporary deferral, a step-up in basis and a permanent exclusion.