Opportunity Zones were established by the ratification of the Tax Cuts and Jobs Act of 2017, in conjunction with the U.S. Investing in Opportunities Act which created tax incentives for investment in designated census tracts called Opportunity Zones. These were designed to spur growth into low-income communities by encouraging reinvestment of capital gains into certified Opportunity Funds.
The City of Santa Cruz has two census tracts that have been designated as Opportunity Zones: census tract 1010 and 1008. These tracts are adjacent to each other and census tract 1010 is bounded by Mission Street and Bay Street to the west, Lincoln Street, Soquel Avenue, and the San Lorenzo River to the east and the Monterey Bay to the south. Census tract 1008 is bounded by the San Lorenzo River to the west, Water Street to the north, Seabright Avenue to the east, and Murray Street to the south. The links below include an overview map of Opportunity Zones in the Monterey Bay region, the City of Santa Cruz's Opportunity Zones Prospectus, and a webinar on implementation of Opportunity Zones by National Development Council.
Opportunity Zone Tax Incentives
- A temporary deferral of inclusion in taxable income for capital gains reinvested into an Opportunity Fund. The deferred gain must be recognized on the earlier of the date on which the opportunity zone investment is disposed of or December 31, 2026.
- A step-up in basis for capital gains reinvested in an Opportunity Fund. The basis is increased by 10% if the investment in the Opportunity Fund is held by the taxpayer for at least 5 years and by an additional 5% if held for at least 7 years, thereby excluding up to 15% of the original gain from taxation.
- A permanent exclusion from taxable income of capital gains from the sale or exchange of an investment in an Opportunity Fund if the investment is held for at least 10 years. This exclusion only applies to gains accrued after an investment in an Opportunity Fund.
Relevant Plans by Census Tract
Census Tract 1010
Census Tract 1008
For more information about the incentive, see the following links:
- Internal Revenue Service: Treasure, IRS issue proposed regulations on new Opportunity Zone tax incentive
- IRS Proposed Regulations for Opportunity Zones (REG-115420-18)
- IRS Special Rules for Capital Gains Invested in Opportunity Zones (Rev. Rul. 2018-29)
- Internal Revenue Service: Opportunity Zones Frequently Asked Questions
- Economic Innovation Group: Opportunity Zones Frequently Asked Questions
- Economic Innovation Group Opportunity Zone Fact Sheet