Officials with the Knox County Development Corp. are looking at yet another way to entice new business.
KCDC president Kent Utt says he has been collaborating with both local and state officials in applying for a new Opportunity Zone designation that would offer tax incentives to businesses willing to locate in a specific area.
They're looking at two potential zones in Vincennes — one downtown and another on the city's north end — as well as a third that would encompass much of Bicknell, Utt said.
“There will be a five-member committee vetting (these applications),” Utt said of the state selection process. “And we're really hoping that we come out on top.”
The idea, Utt said, is to encourage business where there is little, thereby spurring economic development where it's most needed. Selection is limited to certain Census tracts that qualify as low income, or with a poverty rate of at least 20-percent, according to a state website dedicated to this new Opportunity Zones process.
The deadline to apply was March 23, and Knox County's potential zones were just three of more than 300 submitted for consideration, Utt said. Throughout the state, Utt said 72 of Indiana's 92 counties asked for at least one Opportunity Zone.
The incentive for businesses to locate within one of these Opportunity Zones, Utt explained, is in the deferment of a small percentage of capital gains taxes over a period of 10 years. Essentially, the longer the businesses is there, the more potential savings there would be.
The big boost, however, is that any additional growth wouldn't be subject to capital gains taxes at all.
“So say you start a business, it grows, you sell it off, you would never end up paying capital gains taxes on that (growth) as long as the investment occurred within the zone,” Utt said.
Steve Miller, chief financial officer at Pioneer Oil and founder of the non-profit INVin, explained it another way. Say someone invests $100 in a new business within one of these Opportunity Zones. If that business eventually grows to be worth $1 million, anything over the initial $100 investment would be “tax free,” he said.
Such incentives would appeal to a variety of entrepreneurs and existing business owners, Utt said, from large investors to even the proposed Pantheon Business Theater — or specifically the ideas and new businesses that would be generated within it.
“It's a competitive process,” Utt said of securing an Opportunity Zone, “but it can be another tool for us to use in Knox County on top of what we already have.”
Utt compared the Opportunity Zones to the existing Urban Enterprise Association, which collects a portion of the tax benefits realized by businesses located within its boundaries, money that is then given in the form of reimbursement grants to others living and working within the zone who need help with exterior improvements.
The city's Tax Increment Finance Zone, too, which is governed by the Redevelopment Commission, uses a portion of property taxes collected within its boundaries to then reinvest, all in an effort to spur even more growth.
“And this Opportunity Zone is something that can even be laid over top of those,” Utt explained. “And we think it will really help with business attraction.”
Gov. Eric Holcomb will nominate 156 Opportunity Zones with the help of a group of advisors from around the state, according to the state website. Zones will be selected based on a combination of factors, including existing economic development programs, demographic data, the likelihood of attracting short- and long-term investment, growing industry sectors within the community and recommendations made in the application process.