NC Opportunity Zone
The Opportunity Zones program offers investors the following incentives — or tax shelters — for putting their capital to work in low-income communities.
The Opportunity Zones Program (Sec. 13823) provides tax incentives for qualified investors to re-invest unrealized capital gains into low-income communities throughout the state, and across the country. Low-income census tracks are areas where the poverty rate is 20 percent or greater and/or family income is less than 80% of the area's median income.
Investments made by qualified entities known as Opportunity Funds into certified Opportunity Zones will receive three key federal tax incentives to encourage investment in low-income communities including:
Investors receive a temporary tax deferral for capital gains reinvested in an Opportunity Fund. The deferred gain must be recognized on the earlier of the date on which the opportunity zone investment is sold or Dec. 31, 2026.
Participants are allowed to apply a step-up in basis for capital gains reinvested in an Opportunity Fund. The basis of the original investment is increased by 10 percent if the investment in the qualified opportunity zone fund is held by the taxpayer for at least five years, and by an additional 5 percent if held for at least seven years, excluding up to 15 percent of the original gain from taxation.
A permanent exclusion from taxable income of capital gains from the sale or exchange of an investment in a qualified opportunity zone fund, if the investment is held for at least 10 years, so long as the gains accrued from an investment in an Opportunity Fund, not the original gains.
The make up of NC’s 252 opportunity zones
Taken together, the 252 North Carolina Opportunity Zone tracts feature:
· A total population over 1.1 million
· Nearly 45,000 families with children in poverty
· More than 50,000 business establishments
· More than $580 million already invested in these areas, from both public and private sources over the past five years
(Source: N.C. Dept. of Commerce)
Thread Capital Program
Thread Capital works one-on-one with small business owners to identify and provide connections to the optimal financing, networking, and coaching resources for their business. They work with individuals who have good ideas and experience but may have difficulty obtaining financing for their business.
Thread Capital is only one part of a larger ecosystem. They provide direct financing to businesses and provide connections to other lenders if they are not the best fit. Thread Capital works with partners across the state who provide additional coaching and networking.
Capital Access Program
The Capital Access Program (CAP) is available through partner lenders in all 100 North Carolina counties. Any qualifying loan to a business with fewer than 500 employees can be enrolled. Borrowers should contact a participating lender to be considered for the program.
Under the CAP program, the borrower and the lender contribute a total of between two and seven percent of the loan amount, and the Rural Center matches this amount dollar-for-dollar. These funds grow to create a reserve account at each participating lender to be used to offset losses on enrolled loans, thus helping offset the lender’s risk.
The extra assurance means local and regional lenders are more confident to make loans to businesses in need or otherwise cut off from critical capital. And that means more North Carolina small businesses surviving, growing, and thriving.
Participating CAP Loans enrolled tend to be smaller than $100,000 and are often lines of credit. The lender uses its standard underwriting process and determines loan terms. It then submits the required enrollment paperwork to the Rural Center, which then reviews the submission for program compliance.
Tax Incentives for Income-Producing PropeRties
INCOME-PRODUCING - Piggybacks onto the Federal credit.
Tiered base credit equals
15% up to $10 million of QREs, 10% from $10 million to $20 million, no credit above $20 million.
Bonus credits - 5% Development Tier Bonus for projects in Tier 1 or 2 county.
5% Targeted Investment – manufacturing or agricultural related at least 65% vacant
for two years preceding eligibility certification.
Maximum credit $4,500,000, based on a $20 million project of a vacant mill in distressed county.
Credits may be taken in year structure placed in service and carried forward for nine years.
New credit effective January 1, 2016, sunsets January 1, 2020.
Eligibility certification for projects certified under the previous Mill program expire January 1, 2023.
Graduated fee schedule based on total rehabilitation expenses.