Unlocking Economic Growth: Understanding Opportunity Zones in Benton and Franklin Counties

​Unlocking Economic Growth: Understanding Opportunity Zones in Benton and Franklin Counties

​Opportunity Zones (OZs) are designated areas that aim to stimulate economic development in distressed communities by offering tax incentives to investors. Established under the 2017 Tax Cuts and Jobs Act, OZs encourage investment in low-income areas by providing tax benefits to those who reinvest capital gains in these zones.

Purpose and Function of Opportunity Zones
The primary goal of OZs is to spur economic growth and job creation in the underdeveloped regions. Investors can defer capital gains taxes by reinvesting those gains in ((QOFs) that finance projects within OZs. If an investment is held for a certain period, investors may benefit from reduced or eliminated capital gains taxes on the new investment.

Opportunity Zones in Benton and Franklin Counties
In Washington State, 139 census tracts have been designated as Opportunity Zones, including areas within Benton and Franklin Counties. In Benton County, the city of Kennewick features two OZs: the Vista Opportunity Zone and the Downtown/Waterfront Opportunity Zone. Franklin County's city of Pasco also contains designated OZs aimed at attracting investments to stimulate local economic development.

Current Status and Future of the Program
As of 2025, the Opportunity Zone program will remain active, with key tax benefits available to investors. However, the program is set to expire on December 31, 2026, unless extended by new legislation. Recent legislative proposals aim to renew and enhance the program, potentially extending its benefits beyond the current expiration date.

Tax Advantages and Limitations
Investing in OZs offers several tax benefits:

• Deferral of Capital Gains: Taxes on prior gains can be deferred until the earlier of the sale of the new investment, or December 31, 2026.
• Reduction of Deferred Gain: If the investment is held for at least five years, there is a 10% exclusion of the deferred gain.
• Exclusion of Gains from OZ Investment: Gains from the OZ investment itself can be excluded from taxes if held for at least ten years.

However, limitations exist. The initial benefits related to step-ups in basis for investments held for five or seven years are no longer available for new investments, as the program's timeline does not allow for these holding periods before the 2026 deadline.

Resources for Further Information
For those interested in exploring OZ opportunities in Benton and Franklin Counties, local economic development offices and the IRS provide resources and guidance. The Port of Pasco offers information on OZs within Franklin County, while the City of Kennewick provides details on its designated zones. In addition, the IRS website contains comprehensive information on OZ regulations and benefits. Additional information on OZ can also be found by visiting Opportunity Zones | HUD.gov / U.S. Department of Housing and Urban Development (HUD)
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Conclusion
Opportunity Zones present a strategic avenue for investors to contribute to the revitalization of economically distressed areas while receiving tax incentives. In Benton and Franklin Counties, these zones offer the potential for community development and economic growth. As the program's future beyond 2026 remains uncertain, stakeholders should remain informed of legislative developments to maximize the benefits of OZ investments.