The Trump Administration’s tax plan, better known as the Tax Cuts and Jobs Act of 2017, provides several important tax breaks, including a cut in the top marginal rate from 39.6 percent to 37 percent and a reduction of the corporate tax rate to 21 percent.
A less discussed feature of the Act that should benefit Mississippi is the Opportunity Zone program, which allows investors to receive a tax break on capital in impoverished areas. Each state can nominate up to 25 percent of the total number of eligible low-income areas in the state. In Mississippi, 82 percent of the state’s neighborhoods are eligible for the program. That number is higher than the rest of the nation, as 57 percent of neighborhoods nationwide are eligible under the program. This is a great chance for Mississippi communities to target inner city blight that so often undermines the value of surrounding properties and makes attracting customers to existing businesses difficult.
A neighborhood must have a poverty rate of 20 percent or greater and/or family income that is less than 80 percent of the area’s median income for eligibility under the Opportunity Zone program. There are 100 of these opportunity zones in Mississippi, according to the list by the U.S. Internal Revenue Service.
A map of these opportunity zones can be found here.
The program works by investors creating an investment vehicle, known as a qualified investment fund, which uses gains from other investments for funding projects in the opportunity zone. The investors must file a form with the IRS that certifies the fund. The qualified investment fund can be a partnership or a corporation, and investors aren’t required to live in the opportunity zone to qualify.
Investors would be able to defer tax on prior gains if they reinvest those in the qualified investment fund, and would receive further benefits if they keep their investments in the investment fund for 10 years or more.