THE ADVANTAGES TO INVESTORS ARE SIGNIFICANT

When you invest in Opportunity Zones, you can benefit from their exclusive, built-in capital gains tax incentives. These investments, of which at least 90% of its holdings must be invested in Opportunity Zones, are called Opportunity Funds.

If the investment is held for five years prior to December 31, 2026, your liability on the deferred capital gain principal invested can be reduced by 10%. The basis of the investment is increased by 10% of the deferred gain (up to 90% taxed).

If the investment is held for seven years, your liability on the deferred capital gain principal invested can be reduced by 15%. The basis increases by an additional 5% of the deferred gain (up to 85% taxed).

If the investment is held for 10 years, you’ll pay no capital gains taxes on any appreciation in the Opportunity Fund investment. Gains earned can qualify for permanent exclusion from capital gains tax.

What are qualified Opportunity Zones properties?

Partnership interests in businesses that operate in a qualified Opportunity Zone
or
Stock ownership in businesses that conduct most or all of their operations within a qualified Opportunity Zone
or
Property such as real estate located within a qualified Opportunity Zone

Opportunity Zones investment: a timeline

The three tax-incentive benefits:

What qualifies as an Opportunity Zones investment?

• Business infrastructure real estate funds: industrial, retail, mixed use, and transit oriented
• Venture capital funds: Seed state investments, and Series A investments
• Operating business private equity: equity recapitalizations, and growth capital investments
• Enhancement for other federal tax credit transaction: new market tax credits, historic tax credits, low-income housing tax credits

Examples of affordable housing

• Pairing with LIHTC or the HTC
  • Effective for providing housing for families at or under 60% AMI
• Focus on Workforce Housing
  • Providing housing for families at 80-100% AMI
  • Anticipate a 10-year investment
  • No ongoing compliance regulations unless required through local funding or zoning
  • Ability to attract high net worth individuals or corporations as investors

Qualified Opportunity Fund – Assets Test

Certification Process

• An eligible taxpayer self-certifies to become a certified qualified Opportunity fund
• No approval or action by the IRS is required
• A taxpayer attached a completed form (to be released fall 2018) to their federal income tax return for the taxable year

Qualified Opportunity Fund — Noncompliance Penalty