Right now, over one thousand delegates are brainstorming as part of the 51st World Economic Forum. Global leaders, international economists and heads of cultural organizations have been meeting in the ski resort of Davos, Switzerland, annually; the site is symbolic as it is the highest point of Europe. Of course, this year the meeting has gone virtual, with events broadcast from 430 cities around the world.
The delegates are discussing this critical period of history: the unprecedented threat of a pandemic, and the resultant financial crisis; the climate crisis; and social and economic inequality. The theme of the event is “The Great Reset – A Crucial Year to Rebuild Trust.” Its focus is on recovery.
“Here in America, those very same crises are threatening our nation, exacerbated by the failing leadership of our previous president.”
Here in America, those very same crises are threatening our nation, exacerbated by the failing leadership of our previous president. The coronavirus has caused economic devastation, with jobs lost, small businesses closing, buildings vacant coast to coast. People in distressed communities who were already struggling with poverty, unemployment, subpar healthcare, and many other ills are now struggling even more.
As we begin 2021 we are embarking on our own “Great Reset” – with the installation of a new administration, a fresh outlook, and hope for healing.
But what will drive our recovery?
The eradication of COVID-19, certainly. A vow to work towards racial and economic equality. The concepts are nice, but they are also vague. However, there is concrete action that Corporate America, along with high net worth individuals, can take right now.
I am not asking anyone to give a handout. Instead, I am suggesting a strategy that will positively impact not only the communities hit the hardest, but will benefit the corporations and investors themselves.
Corporations and high net worth individuals can drive America’s recovery by investing in Qualified Opportunity Funds. This initiative directs investments, in the form of realized capital gains, into our most vulnerable communities, to reinvigorate businesses, rebuild infrastructure, and bolster residents. Economists say US investors have over seven trillion dollars of unrealized capital gains. Yes – seven trillion.
In a nutshell: Any investor who realizes capital gains has 180 days in which to invest such gains into a Qualified Opportunity Fund (QOF) and reap the tax reduction and deferral benefits of such investment. And, due to COVID, that 180-day period is extended until March 31, 2021 for investors who realized capital gains between October 4, 2019 and October 1, 2020.
Investing in a QOF will enable investors to reduce their tax obligation owed on such capital gains by ten percent (10%) if they hold their interest in the QOF for at least five (5) years. In addition, investors who hold such interest in a QOF through 2026 won’t have to pay tax on such capital gains until their tax return due date in 2027.
However, your opportunity to reduce your tax burden by ten percent (10%) is only available if you invest in a QOF on or prior to December 31, 2021.
Investing in Qualified Opportunity Zones is a win-win for investors: they will benefit from the initiative’s capital gains tax breaks; they will make money, possibly even an outsized ROI; they will have a means of diversifying their own portfolios away from equities which, as we’ve experienced in this volatile market, is critical; and they can use the strategy for multigenerational long term financial planning. Moreover, they can receive annual dividends, and any appreciation on the investment after ten years is tax free, making it a solid investment strategy.
And here’s another win: investors will have the satisfaction of knowing they are impacting low-income urban and rural communities and potentially the lives of millions of people.
Here’s one example. PHT Opportunity Fund, a Qualified Opportunity Fund that makes strategic investments in QOZ communities. The fund acquires companies, real estate and other assets in a variety of industries, providing long-term, sustainable growth to QOZ communities and companies.
One of PHT Opportunity Fund’s current projects will invest in a Qualified Opportunity Zone in Salinas, California, by redeveloping an iconic 28-acre campus. Once completed, it will be one of the most cutting-edge agricultural pre-cooling and cold storage facilities in the nation.
PHT Opportunity Fund is leading The Great Reset of Monterey County and beyond, supporting non-profits such as those for at-risk youth, investing in QOZ businesses with diverse career opportunities with competitive compensation for skilled workers, and offering groundbreaking post-harvest technologies to the growers and shippers of the entire region. Indeed, projects like these will impact consumers nationwide.
As we head into tax season, I urge Corporate America and high net worth investors to go for the reset: invest your capital gains in a Qualified Opportunity Fund, and heal our nation from the inside out.
About Jim White, Ph.D.
Jim White, Ph.D. is founder and president of JL White International. He also is chairman and CEO of Post Harvest Technologies, Inc. and Growers Ice Company, Inc., and founder and CEO of PHT Opportunity Fund LP. White is the bestselling author of five books, including Broken America: Ten Guiding Principles to Restore America and Opportunity Investing: How to Revitalize Urban and Rural Communities with Opportunity Funds.
Throughout his career, he has bought, expanded, and sold 23 companies operating in 44 countries. He holds a B.S. in civil engineering, an MBA, and a doctorate in psychology and organizational behavior. He shares his insights and critical thinking skills in a webcast series, Healing America with Dr. Jim White, in which he explores the many issues and challenges faced by our nation – and how to fix them.