Las Cruces Qualified Opportunity Zones

Las_Cruces_Opportunity_Zones

It is an economic development tool to incentivize long-term private sector investment in low-income communities.

The Benefits

  • A temporary deferral of inclusion in taxable income for capital gains reinvested in an Opportunity Fund. The deferred gain must be recognized on the earlier of the date on which the opportunity zone investment is disposed of or December 31, 2026.
  • A step-up in basis for capital gains reinvested in an Opportunity Fund. The basis is increased by 10% if the investment in the Opportunity Fund is held by the taxpayer for at least 5 years and by an additional 5% if held for at least 7 years, thereby excluding up to 15% of the original gain from taxation.
  • A permanent exclusion from taxable income of capital gains from the sale or exchange of an investment in an Opportunity Fund if the investment is held for at least 10 years. This exclusion only applies to gains accrued after an investment in an Opportunity Fund.


There are 3 ways in which QOZ can be utilized:

  • Purchase of Stock of a QOZ Business
  • Purchase of property in a QOZ
  • Opening a business in a QOZ
    • This implies that the investment in the QOZ must be equity capital by necessity.

What are Capital Gains?

Capital gains are the profits from the sale of an asset — shares of stock, a piece of land, a business — and generally are considered taxable income. A lot depends on how long you held the asset before selling. The QOZ program are focused in Long-Term Capital Gains, which are assets held for more than one year.

***All investments in a QOZ must occur via a Qualified Opportunity Fund***

What is a Qualified Opportunity Fund?

The IRS indicates that a Qualified Opportunity Fund (QOF) is an investment vehicle that is set up as either a partnership or corporation for investing in eligible properties that are in a Qualified Opportunity Zone (QOZ).

  • We have a list of QOF that was compiled by NMEDD (you may request them from me or simply send an email to econdev@las-cruces.org
  • However, a developer can create his/her own QOF and reinvest their capital gains and take advantage of the benefits.

How can an investor(s) create a Qualified Opportunity Fund?

To become a Qualified Opportunity Fund, an eligible corporation or partnership self-certifies by filing Form 8996, Qualified Opportunity Fund, with its federal income tax return. This process has to occur with the IRS.

See the link for the instructions from the IRS here: https://www.irs.gov/pub/irs-dft/i8996--dft.pdf
See the link for Form 8996 from the IRS here: https://www.irs.gov/pub/irs-dft/f8996--dft.pdf

Does the City of Las Cruces have or manage a Qualified Opportunity Fund?

No. QOZ is a program designed to have private capital gains invested in low income communities.

What projects qualify for QOZ program?

  • A Qualified Opportunity Zone Business (QOZB) A qualified opportunity zone business (sometimes referred to as an “OZ business”) is a trade or business (i) in which substantially all of the tangible property (if any) owned or leased by the business is QOZBP; (ii) at least 50 percent of the gross income (presumably of the OZ portfolio company being tested) is derived from the active conduct of a trade or business in the opportunity zone; (iii) a substantial portion of the intangible property of the entity is used in the active conduct of such business; (iv) less than 5 percent of the basis of the property of such business is attributable to “nonqualified financial property”; and (v) the entity does not engage in, or lease land to, a so-called “sin business” (which includes a golf course, country club, massage parlor, hot tub facility, suntan facility, racetrack, gambling facility and liquor store). The term “nonqualified financial property” means debt, stock, partnership interests and certain types of derivatives but does not include cash and short-term debt instruments held as reasonable working capital.
  • QOZ Properties Commercial are considered real estate development and renovation in QOZ/ expansion of business into a QOZ/ expand business inside a QOZ

  • What is considered renovation:
    • Think about it like this—you buy a building in a QOZ that needs renovation, in order for the renovation to be considered into a QOZ tax incentive it would need to renovate based on the formula below:  
      • Value of the Property-Value of Land= Residual Building Value= Minimum amount of money for the renovation
        •    QOZ tax incentive can be combined with other tax incentives.
        •    The 10-year clock starts when you invest for your tax-incentive, in other words, when you put the money in the QO Fund.


Opportunity Zones in Las Cruces

Downtown Las Cruces/Amador Próximo- CT: 35013000500

  • This is a dynamic downtown tract that is attracting diverse audiences with farmer’s market, art, restaurants, bars, museums and City events. It includes a varied retail fusion like mixed use developments. The tract lies on The Las Cruces Downtown Masterplan, Metropolitan Redevelopment Area, The Las Cruces Arts & Cultural District, Amador Proximo Community Blueprint, and Tax Increment Development District.

Airport and West Mesa Industrial Park- CT: 35013001500

  • Las Cruces International Airport (LRU) and Industrial Park is attractive for manufacturing and business development near the airport.
  • The industrial park is an excellent location for light industry, general manufacturing, aviation related, and technology-based industries serving Doña Ana County, El Paso, TX and the US/Mexico border.
  • The West Mesa Industrial Park is located on I-10 with adjacency to the Las Cruces International Airport. A portion of the No. 197 Foreign Trade Zone (FTZ) is located within the West Mesa Industrial Park, including 206 acres of public and privately-owned parcels. Doña Ana County is the grantee for the FTZ and it is prepared to execute agreements designating individual users as operators of the FTZ within their facility as applicable.
  • The Las Cruces International Airport has recently adopted the Airport Masterplan. The Las Cruces International Airport has partnership with New Mexico State University Physical Science Lab for Unmanned Aircraft Vehicles (UAV) development and testing. The Las Cruces International Airport is a general aviation airport owned by the City of Las Cruces and it is FAA certified for serving passenger service (Part 139). The investments that are sought after in the airport are aimed at hangar development, aircraft maintenance, cargo related development, and UAV/UAS related development

Apodaca- CT: 35013000102

  • The Apodaca Blueprint is a neighborhood-specific plan to guide future growth and development of this part of the City. The Tract is 730 acres. It is bound by I-25 on the East and U.S. 70 (N. Main Street) on the West.
  • The Tract includes the former Las Cruces Country Club, which is one of the focus areas identified in the Apodaca Blueprint of the City of Las Cruces. The other focus area is the Villa Mora property which straddles the intersection of E. Madrid Avenue and Triviz Drive.
  • The types of investments that are sought after are ones that abide to the Apodaca Blueprint, which are aimed towards: hospitals, garden offices, assisted living facilities, cottage homes, town houses, mixed-use residential and commercial, anchor retail, out-parcel retail, hotels, offices, restaurants, and multi-family housing. Investments that help foster a diversified sustainable economy that helps promote a community character, sustainable growth and a healthy community

NMSU & Arrowhead Center- CT: 35013000100

  • This Tract contains New Mexico State University with investment potential in the Arrowhead Center, which helps commercialize technology and help small businesses at all stages grow.
  • Las Cruces Convention Center and a hotel in construction process are also located within this Tract. The Burrell College of Osteopathic Medicine is also contained within this Tract.
  • Arrowhead Center assists in commercializing discoveries and innovations, encouraging entrepreneurship, launching and developing new businesses, and creating lasting partnerships between stakeholders on and off-campus.

San Ysidro- CT: 35013001303

  • Located between I-25 and the Rio Grande with potential land use for retail, restaurants, recreational activities, farming, and housing development.
  • The Rio Grande runs on the west of this Tract, which currently is primarily dedicated at agriculture. In addition to the previous land uses described, this Tract indicates great potential for recreation and conservation.
  • This Tract lies in a portion of the Rio Grande Trail Corridor, which is part of the Rio Grande Trail Masterplan. The Masterplan is part of New Mexico’s vision of a 500 -mile cross-state recreational trail for hiking, biking, and horseback riding along the Rio Grande. The International Boundary and Water Commission in collaboration with Audubon New Mexico have made efforts for augmenting the vital streamflow needed to sustain wildlife along the Rio Grande.

Map of Opportunity Zones in Las Cruces
https://arcg.is/KzvO0