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What are some recent developments in agriculture that will help demonstrate the potential of investing in agriculture in OZs?

How can investing in agriculture in OZs help rural communities thrive?


Answers
  • John Wegmann
    August 22, 2019

    The regulations make it quite challenging for an entity investing in farming to qualify as a QOF, especially if the land is already in use for farming. However, your question specifically relates to developments in agriculture, and there I would respond vertical farming or greenhouses. Farming is the last manufacturing activity still to be conducted outdoors, and given the escalating uncertainty of weather conditions, we're at an inflection point where indoor farming will become increasingly efficient. That being said, pairing up with the community and nonprofits is always a good idea. For agriculture in particular, I recommend exploring the EPA's Local Foods, Local Places Program, which gives special consideration to projects located in Opportunity Zones.

  • Jonathan McGuire
    August 22, 2019

    Agriculture is a unique industry that could have great benefits for some and not much benefit for others. Where I've personally seen some activity of late is in the processing products on site. Some are looking at the possibilities of adding a food processor on-site rather than using a third party. These people plan to set up a separate trades or businesses, build the processing plant, and create additional jobs in the rural area. I've also have met with someone who has floated the idea out there of creating on mass-scale urban microgreen farming. Scaling this can hypothetically increase the profitability of the business through reduced overhead and the ability to price products lower than the typical small urban farmer with mircogreens. This doesn't help the rural areas but is another option some are looking at the potential of.

  • Matt Campbell
    August 22, 2019

    With the legalization of hemp production nationally and CBD developments, there is a strong desire in some areas to build out grow facilities in controlled environments that can have the building and operating business each qualify as Qualified Opportunity Zone Businesses. Hog confinement or other ag support facilities like this can also be Qualified Opportunity Zone Business Property. I'm from an agriculture background myself and shame on me that I haven't thought more as to whether operating farms can qualify in an Opportunity Zone. The original use requirements would kick in for use of any tangible property already on a farm, so existing farmers within a zone would have a hard time qualifying, I believe. On the sale side, though, for people selling their farmland dirt to another new farmer bringing his own equipment into a zone, it could shore up prices and be an incentive for new farmers to get into the industry. With the China trade war and ag commodity prices, it's tough in agriculture now, but there should be a way to market agriculture land in Opportunity Zones in community development initiatives. Small towns in Opportunity Zones should be proclaiming to the world they are in a zone and open for business and that a qualifying investment in a business there meeting all requirements could later be sold tax-free. Opportunity Zone tax benefits don't provide a magic bullet to revitalize rural areas but definitely should be another tool to use when coupled with other initiatives. I'm currently working on a housing project in Iowa coupled with TIF to add housing to a community of 6,800.

  • Brad Cohen
    August 22, 2019

    The program doesn’t have anything to do with helping communities. It is about giving tax benefits to people with capital gains if they make a qualifying investment in a Opportunity Zone. If the locals benefit that is presumably a good thing. However, there are no requirements to provide benefits to the local communities.

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