Six tracts in Lancaster County are part of a federal program that looks to boost economic development through tax breaks.
The tracts — two in Columbia and four in Lancaster city — were recently designated as qualified opportunity zones.
The designation allows incentives for investors to develop assets in economically distressed communities by providing cuts on their capital gains tax after the assets are owned for a certain number of years.
The county tracts are among 300 in Pennsylvania that Gov. Tom Wolf nominated for the designation in April.
“We are hopeful this new incentive will bring much-needed investment to many distressed areas across the commonwealth,” Wolf said when announcing his nominations, which were approved June 14.
The Federal Tax Cuts and Jobs Act created the qualified opportunity zones as a tool for promoting long-term investment in low-income communities.
ICYMI: @DCEDSecretary announced that the @USTreasury has approved the commonwealth’s nominations for designation of 300 census tracts across PA as Qualified Opportunity Zones. Learn more: https://t.co/0JmfiulBqP pic.twitter.com/hNIJEt0Udb— PA Department of Community & Economic Development (@PADCEDnews) June 15, 2018
The program provides tax benefits to investors for investing capital gains in low-income community census tracts, as well as certain tracts adjacent to low-income tracts, according to the Wolf administration.
The new tax incentive is for private investors making private equity investments in funds that will then invest in businesses, real estate and other ventures in low-income communities, the administration states. The incentive offers deferral, reduction, and potential elimination of certain federal capital gains taxes.
“We're really excited about it,” Columbia Mayor Leo Lutz said, adding he hopes this will be a valuable tool to attract investors to some vacant structures in the borough.
Randy Patterson, director of economic development and neighborhood revitalization for Lancaster city, said he is waiting to see the IRS guidelines on how investment funds will work.
That clarification is expected sometime this fall.
"I can't say I have any apprehensions yet because I don't know the details of how those investments will be directed or governed, ... but the devil is always in the details," Patterson said. "That's why there's some comfort — from my perspective — in knowing that some organization like the Community First Fund is managing the investment fund as opposed to individuals simply investing in property in those districts."