Governor Jared Polis has put forward 91 areas in Colorado for a new set of federal Opportunity Zone tax incentives. This initiative aims to attract wealthy investors and corporations to low-income regions by offering significant tax benefits.
Supporters argue that such incentives can revitalize communities by funding housing, healthcare, jobs, and new businesses. However, detractors often claim that it primarily benefits affluent investors and projects that would have progressed regardless. While the effectiveness of this program at a national level is debated, state officials assert that since 2019, around $3.2 billion in private investment has flowed into 126 already designated census tracts—often referred to as “zones”—and that this trend is likely to continue as we approach the December deadline for Opportunity Zone 1.0 investments.
Now, the U.S. Treasury needs to finalize Colorado’s latest list of Opportunity Zones, and a representative from Polis’ office mentioned they expect this to be completed by the end of November.
Earlier this week, the Colorado Sun had a chat with Polis via Zoom about the federal program and the newly nominated areas. Here’s a condensed version of that conversation.
The Colorado Sun: How would you characterize the program?
Gov. Jared Polis: It’s really a powerful incentive to encourage investment in underprivileged areas, whether urban or rural. It’s been a concept backed by both parties to funnel capital, infrastructure, and job opportunities to locations facing high unemployment and low income.
Sun: What does this mean in terms of tax incentives?
Polis: Imagine an investor with a sizable gain, say, $10 million. They can either sell now and pay capital gains tax, or they could invest that amount in these zones. By doing this, they could defer paying capital gains taxes for five years and increase the basis of the previous investment by 10% or 30%, depending on the zone’s designation. While the tax benefits reduce for rural zones, they still provide significant advantages.
If an investor holds onto their investment in an Opportunity Zone for ten years, they won’t owe any capital gains tax on any additional appreciation. In essence, this is a compelling tool to bring capital into low-income urban and rural locales. We conducted over 100 stakeholder meetings to gather input to identify where the investments could be impactful.
Sun: What information were you hoping to gather from these meetings?
Polis: We wanted to ascertain where there was interest in investing, as we didn’t want to designate zones without any potential for investment. Discussions revealed various projects, from warehouses to factories, where developers needed that capital to move forward.
Sun: What kinds of investments are being considered for these communities?
Polis: Each nominated area has specific investment opportunities in mind—some may focus on healthcare facilities, others on warehouses or residential housing. These projects are relatively advanced, and the incentives could help ensure they come to fruition.
Sun: How much financial commitment is the state making?
Polis: We utilized existing resources for this selection process and funded stakeholder meetings across the state. The federal incentives vastly outweigh state incentives. Notably, 89 of the zones overlap with existing state enterprise zones, and 33 correspond to rural jump-start zones.
Sun: There’s that saying about a rising tide lifting all boats. How does this benefit all of Colorado?
Polis: For Colorado to prosper, good jobs need to be accessible regardless of your location. Many rural and economically challenged urban areas, particularly within the Denver metro, struggle with employment opportunities. This initiative aims to spur investment that will lead to better housing and job creation in those areas.
