Bellefontaine has secured the Opportunity Zone investment program designation.
Beacon Hill Investment Advisory recently announced the establishment of The Nest Opportunity Fund for investors in Central Ohio. The Opportunity Zone (OZ) investment program is designed to deliver a significant return on investment while providing a valuable service for low income residential areas.
The OZ targets single-family and smaller multi-family homes for renewal and works closely with the communities to maintain the culture and character of the individual neighborhoods.
An OZ is a low income urban area or rural area that was designated as an Opportunity Zone by the governor.
“These were areas left behind,” said Mark Fissel, Beacon Hill Advisory certified financial planner. “There was a lot of migration into suburban and metro centers. So there was this idea of, ‘Let’s help those communities like Bellefontaine and give them a boost.’ We’ve been fortunate with developers in the area wanting to turn downtown around. Hopefully this incentive will also turn this around.”
The program got its start when congress passed tax cuts in 2017.
“Without that one little carve out trying to direct investment funds into low income neighborhoods and rural places,” Fissel said.”The thought was to try to direct funds into areas that can use it.”
At an investment firm, the client base is primarily business owners, and this “carve out” opened up the opportunity for Beacon Hill to be a conduit, he continued.
The way it works, Fissel explained, is that if one owns stock in Apple or IBM and they decide to sell it after 10 years of owning it, they would expect to have a gain and the IRS wants a tax paid on that gain.
Normally, a profit resulting from the sale of an asset is taxed at a maximum capital gains rate of 20 percent.
If one participates in the OZ program, it defers the gain tax if one is investing in the community until the end of 2026 by putting that profit into an OZ Fund that reinvests the proceeds.
If invested for five years, original capital gains tax liability is reduced by 10 percent, with an additional five percent if proceeds are invested for seven years. The amount of tax deferred becomes due and payable in 2026. If the OZ Fund investment is held for at least ten years, then the Fund’s sale of the OZ property will be treated by the IRS as 100 percent tax-free.
All OZs are scheduled to expire at the end of 2028, but investments made prior to this expiration date will continue to accrue tax-free gains until 2047.
To receive the full benefit of the OZ Fund, investors must invest by year-end 2019. For information about the OZ Fund opportunities offered by Beacon Hill, visit nestopportunityfund.com.
Fissel encourages individuals who are thinking of selling a property and had a capital gain, to reach out to see their options in regard to the OZ program.
To see where other Opportunity Zones are located visit https://eig.org/oz-activitymap.