beyond the headlines

 

GO Zone Legislation Extended
Local Leaders Work To Meet New Requirements, Deadlines
WASHINGTON—Both the U.S. House and the U.S. Senate have passed extensions of the Gulf Opportunity Zone (GO Zone) legislation, but the bills differ and a compromise must now be worked out on Capitol Hill. The GO Zone Act of 2005 allows a bonus depreciation tax deduction for property in the five Mississippi counties, seven Louisiana parishes and 11 Alabama counties that suffered the most damage from Hurricane Katrina. The Senate’s version of this bill is the Alternative Minimum Tax and Extenders Tax Relief Act of 2008 and the House’s is the Renewable Energy and Job Creation Act of 2008.

In 2006 when Congress extended the deadline for finishing construction projects, it did not extend the Dec. 31, 2007, deadline to begin construction.  Because of this, only projects that broke ground by the end of 2007 are eligible for the bonus tax deduction. Included in the extension provisions of the bill passed are two counties in Alabama that were not included in the 2005 bill—Colbert and Dallas. Colbert is in the northwest corner of the state and Dallas is in the middle of the state.

Local leaders on the Alabama Coast want to make sure the area is included in the hurricane recovery legislation. According to an e-mail from Foley Attorney Greg Leatherbury to U.S. Rep. Jo Bonner’s office, the House bill appears to grant an extension for the “construction” deadline requirements for a few Alabama counties, but not any change in the “placed in service” deadline of Dec. 31, 2008, for Mobile and Baldwin counties.

When the “placed in service deadline was extended for the Louisiana parishes and Mississippi counties, they were not extended to Mobile and Baldwin counties.

“Due to the economic turndown, insurance crisis, and other matters, the GO Zone benefits have not had the economic stimulus in our area that was intended,” Leatherbury wrote. “Mobile and Baldwin counties desperately need the ‘placed in service’ deadline to be extended from Dec. 31, 2008, to Dec. 31, 2009.”

Gulf Shores Real Estate Broker and Developer Anthony Kaiser has also been in contact with Bonner’s office concerning the legislation. In correspondence, Kaiser wrote, “When Rep. Bonner came and spoke to us a few months ago, I mentioned to him that the effectiveness of the GO Zone rules are restricted by the person that is eligible to buy one of these units and put it into service.”

Currently, GO Zone regulations require an eligible investor to spend at least 750 hours per year in the real estate industry. “If we could open that up to people other than real estate related or, as the IRS calls us, ‘dealers,’ then we could stimulate the real estate economy in a more timely manner,” Kaiser wrote. “If that requirement was changed, we could move some inventory and it is almost like some of the old advantages of the pre-1986 tax package that took away passive investing and buying.”

According to Kaiser, Bonner indicated there may be a chance of amending this type of investor restriction and “could potentially be a better way to approach the Go Zone issues at hand.”

Kaiser also pointed out that in the aftermath of Hurricane Ivan in 2004, the Alabama Gulf Coast received nothing in the way of an economic stimulus package like GO Zone. “Also remember there was mass destruction from Ivan and we got no help whatsoever in relation to what the Go Zone potentially did for us,” Kaiser wrote. “An extra year would be helpful and changing the requirements would be a stimulus package for us as well.”

In Orange Beach, Ala., developers of Bama Bayou—a residential, retail, marina and attractions destination resort in development on the north side of the Intracoastal Waterway near the Foley Beach Express—cleared one hurdle in securing tax-free GO Zone bond money to develop the project when city council members voted to re-incorporate the city’s long dormant redevelopment authority at a recent council meeting. According to Ken Grimes, who serves as the city’s economic development liaison, reincorporating the authority was necessary in order for the city to take the next step in creating a central business district within the city. Grimes explained that in order for Bama Bayou to be eligible for the GO Zone bonds they want, the development needs to be within three miles of the city’s central business district. He also said with the newly developed business district, any business in the city would be within three miles of the district. During the meeting, a capital improvement cooperative district named the Bama Bayou Cooperative District was also created, which, according to Grimes, would be the entity that issues any GO Zone bonds.