The GO Zone Tax

Gulf Shores and Orange Beach Alabama condominiums

This is a brief explanation of the Gulf Opportunity Zone Act, please contact your CPA or Tax Attorney to determine if or how you may qualify for tax benefits.

I have condos that qualify for the Go Zone tax relief, please email or call for details. 251-656-3456

Click here to read my quote in the "Condo Owner" Magazine about the Go Zone!

The condos MUST meet specific criteria to qualify for the GO Zone tax relief. Remodeled or refurnished condos do not qualify.

The Gulf Opportunity Zone Act of 2005

The Gulf Opportunity Zone Act of 2005 provides tax relief to individuals and business affected by Hurricane Katrina. The purpose of the legislation is to provide incentives for individuals and businesses to revitalize and rebuild in the GO Zone. In Alabama, the GO Zone includes Baldwin, Choctaw, Clarke, Greene, Hale, Marengo, Mobile, Pickens, Sumter, Tuscaloosa and Washington Counties.

The act provides for 50% bonus depreciation in the first year of ownership for qualified property. Qualified property includes personal property, computer software, leasehold improvements and residential and commercial property. But certain property is ineligible such as casinos, liquor stores, golf courses and country clubs, massage parlors, hot tub and sun tan facilities and race tracks. The property can be used, but it must be “new” to the taxpayer and to the GO Zone. The 50% bonus depreciation can be used for residential or non-residential rental property that was acquired after August 28, 2005 and before December 31, 2008 substantially used in a trade or business. All other property must be placed in service before December 31, 2007. If the property is sold or moved out of the GO Zone, the taxpayer may have to recapture as ordinary income any excess benefits from the additional depreciation.

If the bonus depreciation creates a net operating loss for the year, it could qualify for a 5 year carry-back instead of the normal 2 year carry-back.

The 179 election, which allows businesses to expense in the year of purchase up to 108,000, has been doubled for the GO Zone to $200,000. The property must be placed in service before January 1, 2008. The 179 election can not exceed the net income of the trade or business.

Under the GO Zone Act, a wide range of businesses have the opportunity to build or rebuild with Gulf Opportunity Zone Bonds. These bonds will carry interest rates from 1.5% to 2% lower that conventional financing. Taxpayer’s will be able to use the State of Alabama’s tax-exempt borrowing authority to borrow money. In order for them to qualify 95% of the net proceeds must be used for “qualified project costs”, the bonds must be designated by the State as qualified for the purposes stated in the law and the bonds must be issued prior to January 1, 2011. Qualified project costs include the costs of acquiring, construction, reconstruction and renovation of nonresidential real property, qualified residential rental projects and public utility properties. The proceeds may not be used to purchase equipment unless that equipment becomes a component part of the building, i.e. immovable.

*****The information contained in this memorandum is for informational purposes only and is not intended to be a comprehensive analysis of the GO Zone Act. Any federal tax advice contained in this memorandum does not constitute a formal tax opinion and is not intended or written to be used, and cannot be used, by any reader thereof for the purpose of avoiding penalties that may be asserted by the Internal Revenue Service. This advice was not written to support the promotion or marketing of the matter addressed by the written advice, and any reader of this advice should seek advice from his or her independent tax advisor. *******