Federal program may offer opportunities for favorable tax treatment to Bloomington investors

Bloomington, In. - Tax incentives extended through a recently enacted federal program may soon make four sections of Monroe County more attractive to investors.  Three regions within the City of Bloomington and one outside city limits have been submitted by Governor Eric Holcomb to the Secretary of the Treasury for designation as Opportunity Zones.  Established by the federal Tax Cuts and Jobs Act of 2017 (P.L. 115-97), the Opportunity Zone Program allows governors to nominate geographically defined, low- to moderate-income census tracts where residential and commercial development qualifies the investor for capital gains tax advantages.   

Working in collaboration, the City of Bloomington, the Monroe County Government, and the Bloomington Economic Development Corporation submitted seven census tracts to be considered by Governor Holcomb.  Of those seven, the governor submitted four census tracts to the U.S. Department of Treasury for approval as Opportunity Zones, including the following:

• Downtown/Trades District/Convention Center

• Current IU Health Hospital Site

• Switchyard Park and vicinity

• County land including the Third Street Corridor and the Southwest Node (SR 45/Curry Pike)

The tract areas were among 156 low-income areas across the state nominated for designation as Opportunity Zones.  To be eligible as an Opportunity Zone, a census tract must have met one of the following requirements:

• The tract has a poverty rate of at least 20%; OR

• (A) For a census tract in a metropolitan area, the tract’s median family income does not exceed 80% of the greater of the metropolitan area median family income or the statewide median family income; or (B) For a census tract in a non-metropolitan area, the tract does not exceed 80% of the statewide median family income.

The areas awaiting designation as Opportunity Zones within the City of Bloomington are key components of the city’s long-term land-use plan designed to foster economic development, create jobs, increase affordable housing, and contribute to the city’s cultural vitality.  If the governor’s recommendations get the go-ahead, projects that might not have been otherwise feasible would be positioned to attract tax-favored capital investments. In Monroe County and Bloomington, this could mean investment in projects generated by existing investments such as the Trades District, Convention Center, Switchyard Park and the current IU Health Hospital site.

“With private investment incentivized in the parts of town where the city is already making major economic commitments -- like the Trades District and the Switchyard Park neighborhood -- we may see even greater vitality and opportunity rising,” said Bloomington Mayor John Hamilton.

By working as a team to present their recommendations to the governor, the stakeholders emphasized the need for community, government, and private interests to coordinate efforts and broaden perspectives. “This is a very significant program for Bloomington and Monroe County’s growing future,” said Lynn Coyne, president of the Bloomington Economic Development Corporation. “It also emphasizes the results of collaboration among local government and community organizations to move our community forward,” Coyne stated.

Attracting private investment to areas where a significant commitment of public funds has been made is critical to their revitalization, explained Alex Crowley, Director of Economic Development for the City of Bloomington.  “This is a pivotal moment for some of these areas, which are economic linchpins for the success of the region,” said Crowley. “We may look back on this as a crucial juncture in the economic trajectory of Bloomington and Monroe County.”

The Tax Cuts and Jobs Act of 2017 established Opportunity Zones to attract capital investment into areas that are economically distressed.  Through this program, the IRS allows those making business investments in a low-income community designated as an Opportunity Zone to defer their taxes on capital gains.  The time-based benefit schedule rewards long-term investment -- investments must be made for at least five years, and extend increasing advantages in proportion to the duration of the investment, culminating in a complete exemption from capital gains tax on the appreciation on the investment after ten years.

Federal approval of Indiana’s Opportunity Zones is expected by the end of May.

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