Opportunity Zone Magazine Volume 1, Issue 3 - Page 67
STATE TAX CONFORMITY WITH OPPORTUNITY ZONES
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
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.
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/
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