Opportunity Zones

In June 2018, Charles County was awarded Opportunity Zones designations for three census tracts:

• The Town of Indian Head;
• An area west of U.S. 301 in Waldorf – the southbound side – from the county line to Berry Road, encompassing the proposed Waldorf Station (Greenberg Gibbons) development;
• An area east of U.S. 301 in Waldorf – the northbound side – from the County line to Berry Road, encompassing the Waldorf Urban Redevelopment Corridor.

What are Opportunity Zones?

The Opportunity Zone program is a nationwide initiative created under the 2017 Tax Cuts and Jobs Act that provides federal income tax incentives for investments in designated communities for the next 10 years. Census tracts became eligible to be designated as Opportunity Zones based on incomes, but only 25% of those could be nominated by State Governors. 

Charles County had eight potential zones, and the economic development department advocated for these three, based on their potential to enhance the local economy.  Governor Larry Hogan included these tracts in his recommendations which were approved by the US Treasury Department that will oversee the program.

How Opportunity Zones Encourage Investment

Investors will be able to defer and even reduce their federal tax liability on the sale of assets if they place their gains from those sales into an Opportunity Fund.  The fund will be used to support investments in small businesses and real estate within the Zones, which will improve those communities and the quality of life for residents. The program is designed to be flexible, allowing a range of different types of investments. And unlike other federal tax credit programs, there is no authorized cap on the amount of capital that could be made available through Opportunity Zone investments. The Maryland Department of Housing and Community Development will administer the program with support from the Maryland Department of Commerce.

The Opportunity Zones program offers three tax incentives for investing in low-income communities through a qualified Opportunity Fund:

1. A temporary deferral of taxes on capital gains when they are reinvested into an Opportunity Fund. The deferred gain must be recognized when the opportunity zone investment is disposed of or by December 31, 2026.
2. Additional tax reduction for capital gains reinvested in an Opportunity Fund. Taxes are reduced 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.
3. 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.

For more information on Opportunity Zones, read this Opportunity Zones presentation from the Maryland Department of Housing and Community Development. You may also contact Mark Thompson, Chief of Commercial Development, by email at ThompsoM@MeetCharlesCounty.com or phone at 301-885-1340 x2200.