A western Colorado technology company is likely the first in the state, and possibly one of the first in the country, to receive an investment that stems from being located in an opportunity zone.
Proximity Space, a Montrose-based company that manufacturers software and hardware for coworking spaces, recently announced that it had secured an investment from a qualified opportunity zone fund. Proximity Space also has employees in Grand Junction at the Factory coworking space at 750 Main St.
The opportunity zones — created thanks to a provision in the federal tax reform bill passed in December 2017 to spur development in underserved areas — allow investors to take capital gains and invest those funds into these zones. If they do so, they can delay paying capital gains taxes on the portion they invest until 2026.
Investors also do not have to pay future capital gains taxes on any increase in value from investing in opportunity zones.
When the opportunity zones were first created in 2018, it was thought that most investment would come in the form of real estate, but some recent clarifications showcased the ability to invest in companies already located in the designated zones. Mesa County has seven opportunity zones.
Proximity Space, which has more than 30 employees between Montrose and Grand Junction, met all of the qualifications for the investment.
Proximity Space CEO Josh Freed said qualified opportunity zone investments can help ensure companies keep their employees in areas that need a boost.
"We have to keep assets and employees in the zone," he said. "We can't take the capital and move to Silicon Valley."
Freed did not say how much of an investment his company received, but said it would cover roughly one-fifth of the company's current fundraising goal. He said the money will be used to grow Proximity Space's network of coworking spaces, which already spans much of the country and has moved overseas.
"I can't wait for the day that work is dictated by what you do instead of where you are," Freed said.
Investors and companies are not required to report investments in opportunity zone funds. However, Jana Persky, opportunity zone program director for the Colorado Office of Economic Development and International Trade, said this is the first such investment she has heard of in Colorado.
Persky said the ability to make this type of investment was always in the tax code, but a recent set of guidelines from the U.S. Treasury Department made it more clear that there were other chances to invest in opportunity zones aside from new real estate.
With the current volatility in the stock market, Persky said opportunity zones could see an uptick in investments in the near future.
"It can be catalytic," she said.
Grand Junction Economic Partnership Executive Director Robin Brown said the investment was an exciting development for Grand Junction and Proximity Space.
"It's awesome and we're really excited about Proximity growing," she said.