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V O L . X X V N O. X M AY 1 3 , 2 0 1 9 16 B Y B R I E N W A L T O N H OW TO M aine is unique among the 50 states, and not just because we are the only state in the U.S. whose name has one syllable. Maine is cur- rently the only state where forward- thinking, business-friendly towns have taken the initiative to create their own Opportunity Zone Funds (OZF) to attract investors to the entire town — not just a single project. Maine has three such funds, in Lincoln, Calais, and Baileyville, and their respective economic development directors are almost giddy over the new OZ rules released on April 17, 2019. e proposed rules total 169 pages and are full of acronyms and legalese that are a great remedy for insomnia, but the impact of those pages is something to get excited about. Today, we will high- light the Top 3 benefits communities can immediately enjoy. 1. Real Property Straddling an OZ: e U.S. Department of Treasury and IRS will now permit real property straddling the boundaries of an OZ, e.g., 49% outside of the OZ, but 51% in the OZ, to qualify for the OZ's tax deferral benefits. is is welcome news to any busi- ness whose land is on the census- tract line that defines the OZ and provides a great opportunity for real estate investors. Essentially, owners of those parcels should enjoy an increase in value because businesses no longer have to be 100% within an OZ — 51% is sufficient. Potential strategy: Partner with a landowner on the OZ line to launch your busi- ness using the 20% in capital gains saved under the OZ rules. 2. "Mega" OZ funds: e rules allow an OZ Fund to invest in multiple businesses or development projects, provided the fund has established "appropriate" monitoring and track- ing protocols, as determined by the IRS. e OZ program is governed by the Treasury Department's Community Development Financial Institution Fund, which has estab- lished appropriate tracking proto- cols routinely used by Community Development Entities (CDEs) in the federal New Markets Tax Credit program. Potential strategy: A town or city has a green light to create their own Fund to support the entire community, not just a single parcel, e.g., multiple projects aggregated under one Fund has economies of scale. So far, three towns in Maine correctly predicted this was com- ing, so count on other OZs to soon maximize this opportunity as well. 3. Vacant properties: I often hear from town managers with entire blocks of vacant buildings that, if rehabilitated, could jump-start the local economy, but they struggle to find banks or developers willing to take the chance. Because the OZ's primary purpose is to support scal- able businesses and keep investment dollars circulating in the community for at least 10 years, the Treasury Department has relaxed the rules that govern the holding period of OZ investments. Specifically, prop- erty that has been unused or vacant for at least 5 years prior to being used in the OZ, can now have a "start date" of the first day any person first uses or places the property in service in the OZ. Potential strategy: is should make it much easier for towns to attract investment in their most devastated neighborhoods, e.g., investors can use capital gains they won't miss. We will cover more benefits in the upcoming weeks, but for now, please be proud that Maine is leading the nation in maximizing the potential of Opportunity Zones. Brien Walton, CEO of Acadia Capital Management II Inc., is a corporate real estate tax attorney certified to issue federal New Markets Tax Credits and is a leading expert in Opportunity Zones. He created and manages the OZ Funds for Lincoln, Calais, and Baileyville. He can be reached at brien @ ac8ia.com Navigate the new rules for Opportunity Zones This material was produced under grant number SH-05035-SH8 from the Occupational Safety and Health Administration, U.S. Department of Labor. It does not necessarily reflect the views or policies of the U.S. Department of Labor, nor does mention of trade names, commercial products, or organizations imply endorsement by the U.S. Government. Created by USM's Cutler Institute in collaboration with Maine Small Business Development Centers. FREE ONLINE TRAINING FOR RETAIL WORKERS: PREVENTING WORKPLACE VIOLENCE www.mainesbdctraining.org • Learn to recognize risks of violence and improve safety. • Versions available for employers, employees, and trainers for team-based learning. Help us impact the lives of our neighbors by becoming a host site or referral partner Together we can create a healthier Maine. •• Healthy Living for ME • I m p rov i n g t h e lives o f M a i n er s Partner with a landowner on the Opportunity Zone line to launch your business using the 20% in capital gains saved.

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