City of Sacramento
“It should be a good tool to get social
equity projects built and use capital
that’s currently parked in tax-shielded
programs, not doing anything for the
greater community.”
-JEFF HARRIS, COUNCILMAN, DISTRICT 3
90
comstocksmag.com | May 201 9
An investor sets up a corporation or a
partnership specifically to establish an “op-
portunity fund” to invest in a designated
opportunity zone and can benefit in three
ways. They may defer their capital gains tax
bill until they sell their opportunity zone in-
vestment or Dec. 31, 2026, whichever comes
first. Or they may receive a reduction of their
capital gains taxes of the original investment
amount by 10 percent if they hold on to the
investment for five years, and that bumps up
to 15 percent if they keep it for seven years. If
they keep an investment for at least 10 years,
they will be exempt from paying taxes on
capital gains. Capital gains from stocks and
other sources are eligible.
“There’s great flexibility for in-
vestors,” says Leslie Fritzsche, City of
Sacramento senior economic develop-
ment project manager. “Opportunity
funds can be established by individuals,
groups or companies with capital gains,
and eligible projects include real estate
development and business develop-
ment,” she says.
Invigoration for Investors
Opportunity zones reward patience. All
incentives — the tax treatment of cap-
ital gains — encourage longevity in an
investor’s stake in an opportunity fund.
Aaron Marchand, vice president of
Turton Commercial Real Estate, says
buyers are asking about opportunity
zones now. “People are learning the
process of setting up opportunity funds,
and it’s spurring activity,” he says. “Ev-
eryone is hoping this is a positive eco-
nomic driver to the investment world. If
the market turns, it could spook some
investment, but even if interest rates
increase, the variables of opportunity
zones may help weather it.”
Marchand says the tax incentives
are luring potential investors from oth-
er areas. “This incentivizes buyers to
look at this market,” he says. A Bay
Area group has purchased what could
be one of downtown Sacramento’s first
opportunity zone projects. “This sale is
a big, empty building at 830 K St. that