On Thursday, the Internal Revenue Service (IRS) announced it was further extending the deadline for Opportunity Zone investments because of the coronavirus pandemic, according to a press release from the government agency.
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But what exactly are Opportunity Zones?
According to the IRS website, an Opportunity Zone is an “economically distressed community” where private investments can get special tax treatments. The designation and tax benefits were created in order to “spur economic development and job creation.”
Opportunity Zones were introduced as part of the Tax Cuts and Jobs Act, the sweeping tax reform overhaul that was added to the tax code in December 2017.
In order to qualify as an Opportunity Zone, a community has to be nominated by a state and has to be certified by the Treasury secretary, the IRS website said.
People and companies who invest in Opportunity Zones are able to defer tax on prior gains on Qualified Opportunity Funds until either they sell those Funds or by Dec. 31, 2026, whichever comes first, FOX Business previously reported.
The first Opportunity Zones were designated in 18 states in April 2018.
Today, there are more than 8,760 Qualified Opportunity Zones in the U.S., including in all 50 states, Washington, D.C., and five U.S. territories, according to the U.S. Economic Development Administration (EDA).
According to the Opportunity Zones Database, states were allowed to “designate up to 25 percent of eligible census tracts as opportunity zones,” which means the number of zones in each state correlates with its population.
That’s why the most populous states, California, Texas, New York and Florida, have some of the highest numbers of Opportunity Zones, according to the database.
However, Puerto Rico was allowed to designate more Opportunity Zones because of the damage caused by Hurricane Maria in 2017.
That’s why Puerto Rico was allotted 863 Opportunity Zones. Meanwhile, California has 879, Texas has 628, New York has 514 and Florida has 427, according to the database.
The states with the fewest Opportunity Zones include Alaska, Delaware, Hawaii, Montana, North Dakota, Rhode Island, South Dakota, Vermont and Wyoming. Each of those states, as well as Washington, D.C., and Guam, each have 25 Opportunity Zones.
Meanwhile, the other U.S. territories, including the U.S. Virgin Islands, American Samoa and the Northern Mariana Islands, have 14, 16 and 20, respectively.