Author Archives: Ryan Farmer

Emerging Law Update Re: Opportunity Zones

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New Program in Tax Reform Bill Provides Investment Capital for Businesses and Developments in Low-Income Opportunity Zones

Governor Bryant To Designate Up to 100 Census Tracts as Opportunity Zones by March 21

Key Points

  • A provision in the new tax reform bill provides the potential for significant tax savings on realized capital gains that are rolled into new investment vehicles known as Qualified Opportunity Funds. Tax incentives include a deferral of taxes on those gains until December 31, 2026 (or earlier, if the investment is sold), a step-up in basis of the capital gain of up to 15% if the fund investment is held for at least 7 years, and exclusion of all gains from the Opportunity Fund if it is held for at least 10 years.
  • Certain low-income census tracts, and certain contiguous tracts, are eligible for nomination as Opportunity Zones, and businesses, developers and other entities holding tangible property or real estate in these zones are eligible to receive investment capital from these Opportunity Funds.
  • Each state’s governor is instructed to nominate eligible census tracts by March 21, 2018. Governor Bryant can nominate up to 100 of these zones in Mississippi. Business, healthcare entities, developers and other interested parties are urged to contact their local municipal leaders to encourage them to apply through the Mississippi Development Authority’s online application portal.

Overview

The Tax Cuts and Jobs Act, signed into law by President Trump on December 22, 2017, includes an innovative new community development tax incentive known as the Opportunity Zones Program. This program is designed to drive long term investment in business and commercial development in low-income urban and rural communities by using tax incentives to encourage private investment of capital gains in new investment vehicles known as Qualified Opportunity Funds.

U.S. investors are eligible to receive a deferral of capital gains tax and other benefits when they rollover realized capital gains into these Qualified Opportunity Funds. These funds will be authorized to invest in certain assets located in Opportunity Zones— mostly low-income census tracts to be nominated by each state’s governor and certified by the U.S. Treasury Department.

Due to the broad base of both potential investors and eligible developments, this program has great potential to spur investment and economic development in low-income communities throughout Mississippi. Through these significant tax benefits, the program looks to attract substantial amounts of capital which could be available to provide financing for entities with interests in commercial property and developments in these Opportunity Zones. Mississippi business and developers should be aware of this important legislative program, the opportunities it presents, and the steps they can take to maximize their ability to benefit from the program.

Tax Incentives for Investment

The Opportunity Zone Program encourages U.S. investors to reinvest their realized short- or long-term capital gains from stock portfolios, mutual funds and other holdings into Qualified Opportunity Funds. All capital gains rolled over into these funds within 180 days are eligible for significant tax benefits, including deferral of tax on these gains, increase/step-up in basis of these gains, and an outright exclusion from gross income of any gains on the sale of the investment in the fund.

  • Deferral of Capital Gains Tax

    Taxpayers pay no upfront tax bill in the year they roll over capital gains into Opportunity Funds. Taxes on these gains may be deferred until December 31, 2026, at latest, or until they sell their Opportunity Zone investment, if earlier.

  • Step-Up in Basis

    If the investment is maintained in the Opportunity Fund for five years, the taxpayer will receive a step-up in basis equal to 10 percent of the original gain. If the investment is maintained in the Opportunity Fund for seven years, the taxpayer will receive an additional 5 percent step-up in basis, for a total of 15 percent.

  • Opportunity Fund Gains Nontaxable

    For investments held for at least 10 years, all capital gains earned from the sale of an Opportunity Zone investment are nontaxable

From Opportunity Funds to Opportunity Zones

“Qualified Opportunity Funds” are a new class of investment tool that will be eligible for certification by the Treasury Department and tasked with aggregating private investment and deploying that investment into Opportunity Zones to support commercial projects, businesses and developments in these zones. The law does not limit the number of funds that can be created or restrict the nature of or potential risk/return on investments. The funds must maintain at least 90 percent of their assets in “qualified opportunity zone property,” which amounts to tangible business property (including commercial buildings, healthcare facilities, equipment, and multi-family complexes), or corporate stock or partnership interests in a business with substantially all its holdings in the same tangible business property, that is new or substantially improved in Opportunity Zones. (Certain disfavored businesses will not qualify, such as casinos and massage parlors.)

The program’s “Qualified Opportunity Zones” will be designated through nomination by each state’s governor, and subsequent certification of the zone by the Treasury Department. Generally, census tracts are eligible for nomination if they are “low income communities” under the same criteria as in the New Markets Tax Credits program—tracts with an individual poverty rate of at least 20 percent and median family income of no greater than 80 percent of the area median. Certain nonqualifying tracts contiguous to low-income communities may also be nominated. View the Mississippi Development Authority (MDA)’s helpful map of eligible tracts.

Governors will determine which eligible tracts in their states qualify as “Opportunity Zones” and may only nominate 25 percent of the total number of eligible tracts per state. In Mississippi, Governor Bryant may nominate up to 100 census tracts of the 399 eligible tracts in the state. Opportunity Zone designations last for a period of 10 years.

Next Steps; Governor’s Designation

Governor Bryant must submit a list of 100 census tracts by March 21, 2017. Applications for census tract nominations are being received from the MDA at its online application portal. Once the Governor’s nominations are received, the Treasury Department will certify the zones after a 30 day consideration period (subject to a 30-day extension).

Once these zones are designated, Mississippi business, healthcare entities, and other development entities with property in (or plans for expansion into) Opportunity Zones will be positioned to benefit from both the tax incentives and the access to capital provided by this program. Mississippi businesses are encouraged to contact their local municipal leaders (mayors, county boards of supervisors, local economic development councils, etc.) and urge them to apply for Opportunity Zone designation at the MDA’s website.

This bulletin was authored by Poteat Lutken, an attorney in Wise Carter’s Jackson office. For more information about this project, contact Poteat at (601) 968-5500, or Jane Meynardie, an attorney in Wise Carter’s Gulfport office, at (228) 867-7141.

Ashley W. Gunn is Accepted into the Mississippi Bar’s Leadership Forum 2018

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Ashley W. Gunn, associate in the firm’s Gulfport office, has been selected to join The Mississippi Bar‘s Leadership Forum 2018.

Her application was chosen from a competitive selection process and showed the initiative necessary for the effective guidance of peers in the legal profession. The Forum’s mission is to prepare Mississippi lawyers for future opportunities in leadership roles.

New 2018 Mississippi Workers’ Compensation Commission Amendments

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Last fall, the Mississippi Workers’ Compensation Commission undertook a substantial revision of both its General and Procedural Rules. Click here to read the amended rules that became effective on January 18, 2018.

One of the most controversial amendments involves Procedural Rule 2.12, which governs settlements of workers’ compensation claims. The Commission added language to limit the calculation of the allowable fees for claimants’ attorneys in settlements that involve funds designated for Medicare Set Aside (MSA) arrangements.

Previously, a claimant’s attorney was allowed to calculate his or her 25% fee using the entire settlement amount, including the amount designated for an MSA arrangement, provided the claimant received from the settlement a net amount equal to or in excess of the MSA amount. With the recent amendment to Procedural Rule 2.12, the 25% fee for a claimant’s attorney may be based only on the amount of the settlement that is not proposed as funding an MSA arrangement.

Read more specific information on the MWCC revisions.

Best Women Lawyers in America 2017

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Congratulations to the following Wise Carter shareholders for being recognized as Best Women Lawyers in America 2017:

Lynda C. Carter

  • Health Care Law

Betty Toon Collins

  • Commercial Transactions/UCC
  • Corporate Governance
  • Corporate Law
  • Health Care Law

Gaye Nell Currie

  • Health Care Law

Virginia S. Gautier

  • Workers’ Compensation Law

Margaret H. Williams

  • Corporate Law
  • Health Care Law
  • Mergers and Acquisitions

Barbara C. Wallace

  • Labor and Employment

Barbara Childs Wallace Testifies in a Hearing on Sexual Harassment Training for Congressional Employees in DC

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Barbara Childs Wallace, Of Counsel with Wise Carter Child & Caraway, also serves as the Chair of the Board of Directors of the Office of Compliance, an independent agency of the U.S. Congress that regulates and adjudicates employment matters raised by the more than 30,000 employees of the legislative branch.

Ms. Wallace was appointed to this Board beginning in 1999 by the leadership of both parties of the House and Senate. On Tuesday, the Chairman of the Committee on House Administration, Congressman Gregg Harper, invited Ms. Wallace to testify in a hearing in Washington concerning sexual harassment training for House employees.

William Konz v. Kansas City Southern Railway Company

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Charles E. Ross and D. Jason Childress defended their railroad client’s right to a federal forum on the grounds of complete diversity in a lawsuit purportedly brought under the Federal Employers’ Liability Act (the “FELA”) by an employee of an independent contractor performing bridge repairs on the railroad’s line.

As a general rule, defendants are statutorily barred from removing to federal courts lawsuits filed under FELA. However, after conducting remand-related discovery the railroad argued, and the court agreed, that the plaintiff had no reasonable possibility of establishing a FELA claim against the railroad. Therefore, the court dismissed plaintiff’s FELA claim and denied his motion to remand.

Shawn T. Ezell v. Kansas City Southern Railway Company

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Charles E. Ross and D. Jason Childress recently successfully defended an order granting summary judgment to The Kansas City Southern Railway Company’s (“KCSR”) in the United States Court of Appeals for the Fifth Circuit.

U.S. District Court Judge, Sharion Aycock, granted KCSR’s motion for summary judgment in a lawsuit brought by a motorist who collided with a stationary train at a public grade crossing in West Point, Mississippi. The Plaintiff appealed Judge Aycock’s decision.

KCSR argued, and a panel of the Fifth Circuit agreed, that:

  1. Plaintiff’s claims that the railroad was negligent for blocking the crossing were preempted by the ICC Termination Act of 1995, 49 U.S.C. Section 10101, et seq. (the “ICCTA”).

    The Plaintiff argued that KCSR was negligent because it violated Mississippi’s Anti-Blocking statute, which prohibits trains from blocking crossings for longer than five minutes and because it violated its own internal operating rule, which directs crews to avoid blocking crossings in excess of ten minutes “when practicable.” The Fifth Circuit held both claims were completely preempted by the ICCTA;
  2. Plaintiff’s claims that the railroad provided him inadequate warning of the train’s presence on the crossing was precluded by Mississippi’s “occupied crossing doctrine.” Under the occupied crossing doctrine, where a train fully occupies a crossing, the presence of the train itself is all the warning to which the traveling public is entitled.

    Plaintiff argued that an exception to the doctrine was warranted given the conditions present on the night of the accident, i.e., the night was “kind of” foggy, the crossing was dark, the approach to the crossing dipped, followed by an incline, the train car on the crossing was black, and Plaintiff could see a traffic light beyond the railroad track. The Fifth Circuit held that the conditions described by Plaintiff were not sufficiently “peculiar” and “unusually dangerous” such that application of the exception to the occupied crossing doctrine was warranted.

Click here to view the full opinion.

Shawn T. Ezell v. Kansas City Southern Railway Company

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Charles E. Ross and D. Jason Childress recently prevailed on a motion for summary judgment in favor of a railroad company in a lawsuit brought by a motorist who collided with a stationary train at a public grade crossing in West Point, Mississippi.

KCSR argued, and U.S. District Court Judge Sharion Aycock agreed, that:

  1. Plaintiff’s claim that the railroad was negligent for blocking the crossing was preempted by the ICC Termination Act of 1995, 49 U.S.C. Section 10101, et seq. (the “ICCTA”). The ICCTA likewise preempts Mississippi’s anti-blocking statute (MCA Section 77-9-235), which purports to limit the amount of time for which a train may occupy a crossing. Under the ICCTA, such regulation may not be imposed on railroads on an ad hoc state-by-state basis;
  2. Plaintiff’s claim that the railroad provided him inadequate warning of the train’s presence on the crossing was precluded by Mississippi’s “occupied crossing doctrine.” Under the occupied crossing doctrine, where a train occupies a public crossing, the presence of the train itself is ordinarily all the warning to which the traveling public is entitled. Judge Aycock held Plaintiff failed to demonstrate that the conditions on the night of his accident warranted his case being excepted from the general rule; and
  3. Plaintiff’s claim that the railroad put the train in motion without proper warning was barred for lack of evidence of any particular injury or damage caused by the train’s movement. As Judge Aycock recognized, Plaintiff failed to put forth evidence of injury caused by the train’s movement (which occurred after the collision as the crew was not aware the collision occurred) distinct from injury caused by the collision itself.