Hawaii’s Opportunity Zones Could Spur Depressed Areas But Interest Low As Deadline Looms

Jun 21, 2019

Credit Edmund Garman / CC BY 2.0 / Flickr

The 2017 federal tax cuts created something called “Opportunity Zones.” The idea was to give investors a tax break by putting money into economically troubled areas.

The Tax Cuts and Jobs Act of 2017 included a tax break that could have positive ramifications for thousands of economically disadvantaged areas nationwide, including right here in Hawaii. These areas were called Opportunity Zones, and the Opportunity Zone allows investors who have capital gains to defer their taxes on those gains if they invest them in the Zones. That’s the simplest explanation, there are hundreds of pages of Internal Revenue Service rules governing the program.

The states were allowed to designate their own Opportunity Zones, using census designated tracts as the basis. Hawaii Gov. David Ige selected 13 such tracts on Oahu and 12 throughout the Neighbor Islands as Hawaii’s Opportunities Zones.

On Oahu, the urban area between the Daniel K. Inouye International Airport and Downtown Honolulu has six Zones with perhaps the greatest potential to attract investors, because their proximity to Oahu’s business and transportation center. Investments could spur redevelopment of these areas from industrial to mixed-use, including much needed housing.

However, PBN research has found that Opportunity Zones have been slow to take off in Hawaii, with just a few limited liability companies registering with the state as investors. The clock is ticking. Investors must act this year for the full benefit of the tax break, as these decline in 2021.