February 27, 2018

CT DECD invites 'Opportunity Zones' petitions

DECD Commissioner Catherine Smith.

The state is inviting Connecticut municipalities to apply to participate in a federal community development program created in the recent federal tax-reform law to promote private investment in underserved communities.

Gov. Dannel P. Malloy and Department of Economic and Community Development Commissioner Catherine Smith say the "Opportunity Zones" program could open the funding spigot from private investors-developers to revitalize low-income communities and neighborhoods.

"We believe this new tool will help engage a new set of investors in some of the communities in the state that need capital infusions the most," Smith said in a statement.

Under the $1.5 trillion federal Tax Cuts and Jobs Act of 2017, the 'Opportunity Zone' program was established to encourage long-term investment in the neediest communities and neighborhoods.

Malloy said the program provides federal tax incentives for investors to re-invest unrealized capital gains into designated zones through so-called "Opportunity Funds.''

The tax reform law mandates that states' governors designate up to 25 percent of the qualified census tracts in their states' as "Opportunity Zones." The U.S. Treasury secretary has final approval of the zones.

Qualified census tracts, Malloy and Smith said, are those with a poverty rate of at least 20 percent of a median income that does not exceed 80 percent of the area median income. The Opportunity Fund model encourages investors to pool their resources in Opportunity Zones, increasing the scale of investments going to underserved areas. These funds may seed new businesses, expand existing firms, or undertake real estate development.

Qualifying investments may include a broad range of commercial and residential investments, such as transit-oriented development, affordable housing and mixed-use development, and energy efficiency and renewable energy projects on public and private assets. In exchange for their investments, Opportunity Fund investors are able to decrease their federal tax burden through the preferential treatment of capital gains.

Towns and cities must return a completed application to DECD no later than March 16.

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