Hawaii Opportunity Zones

Aerial View of Aiea-Waipahu

Opportunity Zones Program

The recently passed Federal Tax Cuts and Jobs Act of 2017 authorized a community economic development program called the Opportunity Zones Program. This initiative provides incentives for investors to re-invest realized capital gains into Opportunity Funds in exchange for temporary tax deferral and other benefits. The Opportunity Funds are then used to provide investment capital in certain low-income communities, i.e., Opportunity Zones.

Benefits to Investors

  • A temporary tax deferral for capital gains reinvested in an Opportunity Fund. The deferred gain must be recognized on the earlier of the date on which the Opportunity Zone investment is sold or December 31, 2026.
  • A step-up in basis for capital gains reinvested in an Opportunity Fund. The basis of the original investment is increased by 10% if the investment in the qualified Opportunity Zone fund is held by the taxpayer for at least 5 years, and by an additional 5% if held for at least 7 years, excluding up to 15% of the original gain from taxation.
  • A permanent exclusion from taxable income of capital gains from the sale or exchange of an investment in a qualified Opportunity Zone Fund if the investment is held for at least 10 years. (Note: this exclusion applies to the gains accrued from an investment in an Opportunity Fund, not the original gains).

Additional Incentives

All the Opportunity Zones in Hawaii overlay with other economic development initiatives such as New Market Tax Credits, Enterprise Zones and Transit Orient Development (TOD) Zones. There are also many other non-census tract-based programs that can be applied such as Low-Income Housing Tax Credits (LIHTC).  Additionally, there may be synergies between investors and their missions and the major property holders and businesses in an Opportunity Zone.

25 Census Tracts Designated as Opportunity Zones

Hawaii designated 25 census tracts as Opportunity Zones as part of the new federal community development program established by Congress in the Tax Cuts and Jobs Act of 2017 to encourage long-term investments in low-income urban and rural communities nationwide. Its stated purpose is to encourage entrepreneurship and expansion capital for economically distressed areas of the country.

 

Maps of Hawaii’s Opportunity Zones

The Hawaii Opportunity Zone’s GIS Map

View the interactive Hawaii Opportunity Zones Map

Hawaii Opportunity Zones GIS Map

Opportunity Zones Maps by County

Here is a list of the Opportunity Zones by census tract for the State of Hawaii and downloadable maps by county:

 

Factsheets on Hawaii’s Opportunity Zones

 

Aerial View of Downtown Kalihi

Opportunity Funds

The Opportunity Zones program provides a federal tax incentive for investors to re-invest their realized capital gains into Opportunity Funds that are dedicated to investing in Opportunity Zones. Opportunity Funds are the private sector investment vehicles that invest in Opportunity Zones. The fund model will enable a broad array of investors to pool their resources in Opportunity Zones, increasing the scale of investments going to underserved areas. A list of Opportunity Zone Funds can be found at:

Opportunity Zone Fund Directory from Novogradac & Company LLP

Opportunity Zone Fund Directory published by National Council of State Housing Agencies

 

Internal Revenue Service Guidance

IRS LogoOn April 17, 2019 the IRS issued guidance relating to deferral of gains for investments in a qualified opportunity fund

On October 19, 2018 the U.S. Department of the Treasury released long-awaited guidance on Opportunity Funds and Opportunity Zone investments. The proposed regulations and revenue ruling are meant to address issues related to getting funds established and making investments.

 

Resources

  • Economic Innovation Group – EIG is a bipartisan public policy organization addressing America’s most pressing economic challenges.
  • Novogradac & Company LLP – Novogradac is a national professional services organization that consists of affiliates and divisions providing professional services that include certified public accounting, valuation and consulting with more than 25 offices nationwide.
  • Department of the Treasury, Community Development Financial Institutions Fund – The Community Development Financial Institutions Fund (CDFI Fund) plays an important role in generating economic growth and opportunity in some of our nation’s most distressed communities.
  • Council of Development Finance Agencies – The Council of Development Finance Agencies is a national association dedicated to the advancement of development finance concerns and interests. CDFA is comprised of the nation’s leading and most knowledgeable members of the development finance community representing hundreds of public, private and non-profit development entities.

 

Understanding Opportunity Zones in Hawaii Seminar

 

Understanding Opportunity Zones in Hawaii Seminar

On October 4th, 2018 a half day seminar in Honolulu was held titled “Understanding Opportunity Zones in Hawaii.” The event was co-sponsored by DBEDT, Hawaii Community Reinvestment Corporation, and the Federal Reserve Bank of San Francisco.

Almost 200 people attended the event and joined the conversation exploring possibilities for Opportunity Zones in Hawaii. Local and national experts (including Maurice Jones of LISC and a Brent Parker from Novogradac & Company) spoke and focused on what we know so far about how this new tax incentive can be used and the roles regional stakeholders can play to ensure the benefits of this investment vehicle are broadly shared. Here are the presentations:

 

Hawaii Opportunity Zones Network – Coming Soon!

The Hawaii Opportunity Zones Network is a place to find and share information about Opportunity Zones, Opportunity Funds and related projects in Hawaii. Use this service to:

  • Find a professional expert in law, tax, accounting, real estate or business consulting or make others aware of your expertise.
  • Find an Opportunity Fund in which you can invest, or share information about your own fund.
  • Find a project seeking funding, or share your own project with potential investors.