According to Steven Bertoni’s article published by Forbes Digital News in 2018, tech billionaire Sean Parker traveled to western Tanzania in 2007, and witnessed the extreme poverty, seeing little hope for the private investing needed to deliver progress to the region.
Sean Parker had seen the rundown areas of San Francisco and DC and began pondering the problem: “People were sitting on large capital gains with low basis and huge appreciation. There was all this money sitting on the sidelines. I started thinking, How do we get investors to put money into places where they wouldn’t normally invest?”
Parker approached then Newark New Jersey mayor Cory Booker, who understood the concept: “If we can get the trillions of dollars of capital off the sidelines and get the best investment minds coming into our communities, we can end up creating jobs and opportunity.”
In 2015 Parker created the think tank The Economic Innovation Group, which created the policy: A powerful incentive was needed to unlock large amounts of capital, gather the capital into funds, and force the funds to invest in distressed areas.
Investing in Opportunity Act 2017
Sean Parker and his think tank, together with Democrat Senator Cory Booker, and Republican Senator Tim Scott created the most significant U.S. tax break and the best opportunity ever, for under-performing American communities.
The Investing in Opportunity Act of 2017 created the vehicle for the certification of over 8,700 Opportunity Zones in the country, 25 in the state of Hawaii.
In December 2017 Senator Scott met with President Trump and got his blessing for the Opportunity Zone provision to be included in the 2017 Tax Cut and Jobs Act. As Senator Scott stated in his February 14, 2018 OpEd piece in USA Today: To create a brighter tomorrow for communities that have been left behind, we need to capitalize on the private-sector resources that can help boost these areas in ways we haven’t seen before.
State governors then chose over 8,700 Opportunity Zones, from up to 25% of each state’s low-income census tracts, and Senator Booker reminded community leaders they must ensure a large portion of locals are hired to service the new projects, and towns adopt and enforce zoning and affordable housing laws as new capital flows into each community.
25 Opportunity Zones in Hawaii were certified by the US Treasury Department: Two on Kauai, four on Maui, six on the Big Island, and 13 in Honolulu.
Kauai Opportunity Zones
Two Opportunity Zones were designated on Kauai in 2018 — the Lawai Hawaii Census Tract 406.04 and Wainiha Hawaii Census Tract 401.04.
Kukui’ula, a 1,000 acre planned community, situated in the Lawai Hawaii Census Tract 406.04, offered investors the opportunity to invest long term and short-term capital gains until December 31 2026 when the 10-year Lawai Hawaii Census Tract 406.04 Opportunity Zone term expires.
Local Jobs Created by OZ Investment
By October 2019 I was seeing our South Shore Kauai community flourish from the Opportunity Zone investments in the private community of Kukui’ula located in the large Lawai Opportunity Zone. Investors were purchasing ready-to-build homesites with the plan to improve the sites with vacation rental homes in order to produce the business income required in the legislation rules.
Local licensed architects, engineers, general contractors, and landscapers were productive and hiring. Local tradespeople were fully employed and earned living wages. As projects moved through to completion, local interior designers, artists, and furniture stores benefited, followed by locally owned property management and maintenance companies.
Taxpayers were able to defer tax owing on capital gains by investing in Opportunity Zone property and businesses, slowly erasing the tax obligations on a portion of those gains, while having those proceeds grow tax-free.
If the OZ property is held by the investor for 10 years, the appreciation when the property is sold is tax-free. It is my understanding if the property is sold within the 10-year period and replaced with Opportunity Zone property, the original OZ property basis is transferred to the new OZ property provided that intent is outlined in the initial OZ investment plan.
Kukui’ula Available Homesites for Opportunity Zone Investors
There are currently 15 unimproved Kukui’ula homesites listed for sale from the $700,000 garden view 12,160 sq ft Kaimalino Neighborhood Homesite B, to the $1,400,000 oceanview 15,437 sq ft Aepo Nei Neighborhood Homesite 13, to the $4,875,000 panoramic coastline view 1.63 ac Kula Makai Neighborhood Homesite 6.
Lawai Hawaii Census Tract 406.04 Opportunity Zone Expires December 31 2026
All the 2018 opportunity zones created under Opportunity Zones 1.0 are set to expire December 31, 2026, and new criteria were set for the ten-year Opportunity Zones 2.0 program which begins January 1, 2027.
The opportunity to invest in capital gains in Kukui’ula under the program ends December 31 2026. 100 days to form the qualified opportunity zone fund required by the propram, and to direct the fund to complete the purchase of the under-improved OZ property.
Kauai Ineligible for Opportunity Zones 2.0 Program
The new criteria for Opportunity Zones 2.0 eliminated all Kauai census tracts from being considered for OZ 2.0 designation by the Hawaii governor. Therefore, the unique opportunity to invest capital gains from the sale of real estate, stocks, and a business in Kukui’ula, Kauai qualified OZ 1.0 property under the less stringent reporting rules of OZ 1.0 ends December 31 2026.
Schedule time to discuss your capital gains investment options with your financial advisors and determine if investing capital gains in qualified OZ 1.0 property at Kukui’ula Kauai works for you and your family.
Leave your opinion here. Please be nice. Your Email address will be kept private, this form is secure and we never spam you.