The new federal program could lure fresh investment to distressed areas. But the clock is ticking.
Twenty years ago, the rural hamlet of South Boston, Va., was a thriving blue-collar, middle-class community. Most of its residents were employed in manufacturing, such as at the nearby Burlington Industries textile plant and Russell Stover candy factory, or out in the tobacco fields.
Today, the once vast tobacco industry is largely derelict (China is now the world’s leading producer), and the Burlington plant and Russell Stover factory are closed. “We lost about $100 million in payroll out of this community over four years,” says South Boston Town Manager Tom Raab.
This is a familiar story for the nation’s rural areas, but Raab is optimistic about a turnaround. He is pinning his hopes, in part, on the new “opportunity zones” program passed in last December’s federal tax overhaul. It could generate billions in economic development for distressed communities like South Boston — provided they get the help they need.
Opportunity zones represent a breakthrough approach to community development. The program relies on an ingenious mechanism for spurring investment: Instead of tax credits or other traditional subsidies, investors are offered a temporary tax deferral for capital gains reinvested in designated opportunity zones. For investments held longer than 10 years, that deferral becomes forgiveness — a huge boon.
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