The potential opportunities presented by the new federal Opportunity Zone investment program are enormous, according to David A. Bornn, chief legal counsel for the Office of the Governor.
The federal program is in its infancy, and no territory projects are concrete yet, but Bornn said there is over $6 trillion dollars eligible for investment in such zones nationally. Virgin Island officials have begun reaching out to entice as much of that money as they can to the territory.
Earlier this month Virgin Islands officials were at the NAI Miami Conference for Florida and the Caribbean. “We did connect with several potential investors in varying fields of interest,” Bornn said.
The money the Opportunity Zone program hopes to attract is from a different pool than the money attracted by other programs offered by the Economic Development Authority. Investments in Opportunity Zones will allow investors to defer the payment of capital gains taxes. If the investment stays in place for 10 years, the investor may not have to pay any capital gains tax on it at all.
An example would be if a person sells stock in 2019, she defers payment of capital gains on that sale if she invests it in an Opportunity Zone. If she sells the investment after five years she receives a 10 percent discount on her tax rate. If she sells it at seven years she receives a 15 percent discount, and if she sells it after 10 years no taxes will be due.
“It is a great federal program that has potential to facilitate more investment in the Virgin Islands,” said Kamal Latham, chief executive officer of the Economic Development Authority. He termed it “One more tool in the tool box.”
“Multiple conversations are going on that could bring more investment to the territory. We are optimistic,” Latham said.
The Virgin Islands had three Opportunity Zones designated last year. There are 770 nationwide. The federal program, which is being administered in the territory by the Economic Development Authority, was created by the Tax Cuts and Jobs Act on December 22, 2017.
The Opportunity Zones do overlap with other programs such as the Enterprise Zone program, also administered by the EDA. Both the Opportunity Zone program and the Enterprise Zone program aim to help economically distressed communities. Bornn says this is not a problem of duplication because both programs can be used together on a project. In a concept he described as “stackability” he said other programs, such as those encouraging investment in historic districts and encouraging hotels, could be used in conjunction with the Opportunity Zone investment.
The Opportunity Zone on St. Croix covers approximately half the island. The area around Christiansted is covered. Frederiksted is also covered but that part of the zone extends east through island center all the way to King’s Hill. The Charlotte Amalie zone extends west past the airport and east past Bovoni and north almost to the center of the island.
The Enterprise Zones are confined to the business districts of Christiansted, Frederiksted, and Charlotte Amalie. The Enterprise Zone Commission offers:
90 percent reduction in corporate income tax,
90 percent reduction in personal income tax,
100 percent exemption on gross receipt tax,
and 100 percent exemption on business property tax.
The Enterprise Zone program is designed for companies located in the towns to help revitalize communities that are now considered to be distressed.
Although St. John has no Enterprise or Opportunity Zones, Cruz Bay was designated as a National Historic District in October 2016.
Property owners within the historic district are eligible to apply for “a 20 percent tax credit for increasing the restoration and rehabilitation of an approved historic site.” In the future, property owners might also qualify for low-interest loans under the Reconstruction and Rehabilitation Revolving Fund.
These benefits have already been made available to property owners in portions of Christiansted and Frederiksted on St. Croix, and Charlotte Amalie on St. Thomas, which were designated as National Historic Districts between the 1950s and the 1970s.
Property owners who want to take advantage of the Historic Preservation programs have to agree to follow the guidelines issued by the territory’s Historic Preservation Commission, which can set restrictions on paint color, signage, lighting, fencing, and construction of additions or demolition of existing structures and even natural features, such as heritage trees.
The Development Authority is a semi-autonomous government organization responsible for the promotion of economic development in the U.S. Virgin Islands. Also under its supervision are the Economic Park Development Corporation (formerly the Industrial Park Development Corporation), and the Economic Development Bank (formerly the Government Development Bank and the Small Business development Agency).
Original Source: https://stjohnsource.com/2019/12/19/virgin-islands-initiating-opportunity-zones-to-attract-investment/