TRI-CITIES, Tenn. (WJHL) – Some say a little-known section of the Tax Cuts and Jobs Act of 2017 is incentivizing new investment in Northeast Tennessee.
Congress allowed states to designate “Opportunity Zones” with the goal of bringing long-term capital into low-income areas to bolster the development of business, housing and tourism.
“Opportunity Zones could be the most significant thing that we’ve seen in economic development in this country…period,” said John Cannon, a local entrepreneur.
Tennessee has 176 census tracts that are qualified opportunity zones. Sixteen of them are in Northeast Tennessee.
Under the law, investors can reinvest their capital gains into “Opportunity Funds” to benefit from federal tax incentives.
“Local businesses always need capital. That’s the oxygen for a small company. This, in my lifetime, is one of the truly unique ways to bring capital into our region,” said Cannon. “Right now the biggest obstacle is education. We need more people to know about opportunity zones.”
Cannon and Jason Hudson, the founder of TN 1st, said they’re submitting a $10 million fund proposal that they hope will help local people launch big ideas.
“This is a potential pipeline for entrepreneurs who have an idea to finally get a community of support around them,” said Hudson. “I want entrepreneurs to know they’re not alone in the process. We have technical teams, we have financial teams, we can surround them with the tools and the resources they need.”
Heath Guinn, the founder of Sync Space, said opportunity zones could help fill some of the gaps in resources stunting the growth of entrepreneurship in the region.
“I think it could have a really big impact if we’re creative and we work together to put a fund together,” said Guinn. “We have to do something that sets us apart.”
Hudson said investors can benefit from investing in Opportunity Zones in three ways:
- Capital gains are deferred until 2026
- 15% of the gain can be eliminated forever through gain forgiveness
- If the investment in the opportunity zone is maintained for at least 10 years, capital gains tax on the investment can be avoided
“Any investor that invests after December will not realize the full potential of the benefits available so there’s definitely a sense of urgency to get the projects in front of investors,” Hudson said.