Opportunity Zone Magazine Volume 1, Issue 3 - Page 67

STATE TAX CONFORMITY WITH OPPORTUNITY ZONES 67 Changes to the AITC made in 2019 increased the credit from 10% to 25% of the investment for qualified technology investments made in OZs, low-income communities, or state-certified minority- or womenowned businesses for tax years that started Jan. 1 this year. Corporate taxpayers may carry over tax credits up to 15 tax years following the tax year for which a credit was allowed. However, individuals cannot carry forward tax credits. 14 By providing additional incentives, the state hopes it will be able to increase investment in some of its most economically depressed communities. The OZ incentives set forth by the Tax Cuts and Jobs Act have sparked much debate regarding state conformity. While many believe the OZ incentives will spark growth in deteriorating communities, some legislatures wonder whether the new incentives will have the desired effect in the low income communities they are meant to serve. In states like Arkansas, some legal experts have questioned whether special conformity rules that provide benefits only to investments made within the state raise constitutional concerns, as this may be in conflict with the Dormant Commerce Clause. Arkansas’s law could be deemed discriminatory against interstate commerce by restricting the tax incentive to only state investment. Going forward, we can expect to see more state discussion regarding the TCJA Opportunity Zone conformity in the near future. Matt Johnson is a certified public accountant and director at CLA. He has more than eight years of experience in tax compliance and consulting with a focus on state and local tax issues, including income and franchise taxes. His background also includes advising clients on pass-through entity taxation. Markie Zick is an associate with CLA and focuses on state and local tax consulting. Her experience includes providing sales and use tax audit defense for clients, as well as performing nexus studies in light of the Wayfair decision. She holds a Juris Doctor. Sources: 1 Pimentel, Joseph, (2019, August 15). “Opportunity Zones Could Flop in California, Officials Warn.” Retrieved from https://www.bisnow.com/los-angeles/news/opportunity-zones/strongunlikelihood-california-will-conform-to-opportunity-zone-tax-advantages-100351 2 California Opportunity Zones (State of California). About Opportunity Zones. (2019). Retrieved from https://opzones.ca.gov/ 3 Barth, Ian. (2019, June 04). “Newsom’s Opportunity Zone Restrictions Will Chase Money out of California.” Retrieved from https://www.sacbee.com/opinion/article231561803.html 4 Lovett, Jennifer. (2019, September 06). “Making California Opportunity Zone Ready Will Boost Critical Housing and Clean Energy Projects.” Retrieved from https://cafwd.org/reporting/entry-new/ making-california-opportunity-zone-ready-will-boost-critical-housing-and-cl 5 Williams, Brad. (2019, April 19). “California Needs to Conform With Federal Opportunity Zone Provisions.” Retrieved from https://caeconomy.org/reporting/entry/california-needs-to-conform-withfederal-opportunity-zone-provisions 6 Capital matrix Consulting. “Economic and Fiscal Impacts of California Conformity to Federal Opportunity Zone Tax Provisions.” Retrieved from https://ee.caeconomy.org/resources/entry/studycalifornia-conformity-to-federal-opportunity-zone-tax-provisions 7 Williams, supra note 5.. 8 Arkansas Code Annotated, Section 26-51-460. 9 Hawaii Revised Statutes, Section 235-2.3 10 H.5151A. General Assembly. 2019 January Session. (R.I. 2019). 11 H.B. 166. 133rd Regular Session. (Ohio 2019). 12 Ebert, Alex. (2019, October 10). “Ohio Looks to Expand Opportunity Zones and Reporting.” Retrieved from https://news.bloombergtax.com/daily-tax-report-state/ohio-governor-looks-to-expandopportunity-zones-and-reporting 13 Tapinto Edison Staff. (2019, July 1). “New Law Raises Tax Credit Amount Under “New Jersey Angel Investor Tax Credit Act.” Retrieved from https://www.tapinto.net/towns/edison/articles/newlaw-raises-tax-credit-amount-under-new-jersey-angel-investor-tax-credit-act 14 State of New Jersey- Department of the Treasury (Division of Taxation). Corporation Business Tax and Gross Income Tax. (2019). Retrieved from https://www.state.nj.us/treasury/taxation/notice angelinvestortaxcreditincrease-cbt.shtml OPPORTUNITYZONE.COM