I’ve learned something today. Apparently Tuscaloosa County is a part of the “Gulf Opportunity Zone”, which includes parts of Alabama, Mississippi, Florida, and Louisiana that were hit the hardest from hurricanes Katrina and Rita. What seems to be grabing the most attention is the fact that many developers (local and national) are building luxury condominiums and taking advantage of the tax breaks given to them by the federal government.
First, we need to actually take a look at the “GO Zone”. From Gozoneguide.com:
The Gulf Opportunity Zone Act of 2005 (H.R. 4440 passed by Congress on Dec. 16, 2005, and signed by President Bush on Dec. 21, 2005) establishes tax incentives and bond provisions to rebuild the local and regional economies devastated by hurricanes Katrina and Rita. The act is commonly referred to as the “GO Zone Act.”
…The GO Zone (also called the “Core Disaster Area”) covers a portion of the Hurricane Katrina Disaster Area determined by the Federal Emergency Management Agency to be eligible for individual and/or public assistance from the federal government.
If you would like a further explanation, you need to check out the AP story linked above.
So what parts of the Southeast are considered part of the GO Zone? Let’s take a look at the map from GetGOZoneInfo.com (For a closer look at Alabama, CLICK HERE):
So why was Tuscaloosa included in the GO Zone? Well, the article states it is because of the hundreds of evacuees who remained here for weeks after the hurricane. Tuscaloosa only received minor damage compared to the rest of the Katrina disaster areas. Tuscaloosa held a larger number of Katrina evacuees after the natural disaster. But,the area was apparently deemed a disaster area before the GO Zone was developed. Still, I’m left wondering if Tuscaloosa really needs all of the tax help given to areas that suffered greatly from Katrina. Please note that The tax break is not available to people who buy a home for their own use in Tuscaloosa.
Many are wondering if Senator Richard Shelby (a Tuscaloosa native) was the main reason for Tuscaloosa County being included in the GO Zone. Shelby has a long history of bringing money to West Alabama, as well as the state of Alabama as a whole. He does have a seat on the Appropriations Committee, which brought this bill to life.
People all across the nation and the state seem to be getting in on the act as well. From the AP story linked above:
Dave Toombs, a real estate investor from Irvine, Calif., with no connection to Alabama, bought two new, upscale townhouses at The Traditions, just minutes from campus, as investment properties. He said he hopes to use GO Zone tax benefits when he files his taxes.
“If we qualify for the GO Zone it will be icing on the cake,” said Toombs, who is consulting with an accountant because the rules are complicated. “It’s another plus check to put in the column.”
Tuscaloosa real estate broker Richard Ellis said an investor from Birmingham contacted him about GO Zone property and wound up buying 30 condo units for about $180,000 each.
Please continue reading
Just to give you a decent idea of what this means for real estate developers in the GO Zone, I’ll provide you with an example:
New Condo purchased by an individual or business who DOES NOT qualify for the GO Zone.
|Basis for depreciation||450,000.00|
|1st year depreciation||$16,363.60|
New Condo purchased by an individual or business who DOES qualify for the GO Zone.
|Basis for depreciation||450,000.00|
|50% Bonus depreciation||225,000.00|
|1st year depreciation||8,182.82|
|Total 1st year depreciation||
As for those who wish to play football politics regarding this situation, you might want to bite your tongues since Richard Shelby has made sure plenty of money ($65 million) has been given to a school in a Lee County town as well. The University officials there even went so far as to name the facilities after Senator Shelby. Yes, even Auburn people are sucking up to the Senator. (Alabama also has an engineering quad being built around SHELBY Hall as well). Shelby isn’t playing football politics.