IRS RELEASES NEW UPDATED QUALIFIED OPPORTUNITY FUND GUIDANCE
Earlier this week in response to the ongoing coronavirus crisis, the IRS released new guidance for Qualified Opportunity Funds. Notice 2020-39 allows additional time for taxpayers to defer their eligible gains. If the 180th day to invest in a QOF lands between April 1, 2020 and December 31, 2020, the taxpayer now has until December 31, 2020 to defer. In addition, QOFs have more time to identify qualifying property. Specifically, a QOF's failure to hold less than the 90% of its assets in Qualified Opportunity Zone Property on any semi-annual testing dates from April 1, 2020, through Dec. 31, 2020, is due to reasonable cause under section 1400Z-2(f)(3) and such failure does not prevent qualification of an entity as a QOF or an investment in a QOF from being a qualifying investment.
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT RELEASES OPPORTUNITY ZONE TOOLKIT
The Department of Housing and Urban Development (HUD) released an updated toolkit, providing resources and tips for local leaders and developers on best practices for Opportunity Zones. The initial toolkit published by HUD was released in September, 2019. The May 2020 toolkit updates include guidance on assessing housing needs, evaluating commercial markets, conducting workforce analysis, and more.
OPPORTUNITY ZONES: UPDATED LEGISLATION & GUIDANCE
The new round of legislation has strengthened the commitment of the IRS and Treasury Department to reducing uncertainty surrounding the operation of Opportunity Zone Funds and supporting the expansion of investment toward Opportunity Zone Businesses, in addition to Opportunity Zone property.
WHO'S LAUNCHING OPPORTUNITY FUNDS?
Steve Glickman, co-founder and executive director of the Economic Innovation Group, discusses Webinar by Enterprise on "Who’s launching Opportunity Funds". Updates and additional guidance from the IRS. How cities, and states are planning for investment and engaging local stakeholders. Information on the tools and resources, including how to access free 25-page report for every Opportunity Zone in the nation.
QUALIFIED OPPORTUNITY FUNDS (IRS)
This document contains proposed regulations that provide guidance under new section 1400Z-2 of the Internal Revenue Code (Code) relating to gains that may be deferred as a result of a taxpayer’s investment in a qualified opportunity fund (QOF). Specifically, the proposed regulations address the type of gains that may be deferred by investors, the time by which corresponding amounts must be invested in QOFs, and the manner in which investors may elect to defer specified gains.
MOST UNBELIEVABLE TAX BREAK
"The heart of this new law: Opportunity Zones, or "O-zones," low-income areas designated by each state. Investors will soon be able to plow recently realized capital gains into projects or companies based there, slowly erase the tax obligations on a portion of those gains and, more significantly, have those proceeds grow tax-free. There are almost no limits. No limits on how much you can put in, how much tax you can avoid and, for most of the country, the types of taxes you can avoid, whether federal, state or local. No limits on how long those proceeds compound tax-free. And precious few limits on what types of investments you can make..." -Forbes
TAX INCENTIVES IN OPPORTUNITY ZONES?
Opportunity Funds promote investment in the development of low-income communities across the US, by offering investors federal tax advantages that are only available through the new Opportunity Zone program. When investors put their money to work in qualified Opportunity Zones through a qualified Opportunity Fund, they can defer and reduce their capital gains tax burden thanks to provisions outlined by the 2017 law.
OPZ: AN INNOVATIVE INVESTMENT VEHICLE
The Tax Cuts and Jobs Act created a section of the Tax Code that allows taxpayers to take advantage of a new investment vehicle called Opportunity Funds. The purpose of this new investment vehicle is to help direct resources to low-income communities, known as Qualified Opportunity Zones, through a more market-driven approach.
AN EARLY OVERVIEW OF PROGRAM DETAILS
Originally introduced in the Investing in Opportunity Act (IIOA), the Opportunity Zones Program was enacted as part of the 2017 tax reform package (Tax Cuts and Jobs Act). The program is designed to drive long-term capital to rural and low-income urban communities throughout the nation, and uses tax incentives to encourage private investment in impact funds.
By Rachel Reilly Carroll | January 2018 | Enterprise
OPPORTUNITY KNOCKS UNDER TAX REFORM
As part of the new tax law, a taxpayer may elect to defer capital gain from the sale or exchange of property by investing in a qualified opportunity zone fund until the earlier of the disposition of the investment or December 31, 2026. A portion of the capital gain from the sale or exchange may be excluded permanently if the investment is held for at least five years. Also, gain from the sale of the investment may be permanently excluded if the investment is held for at least 10 years. This article provides an overview of the new rules for qualified opportunity zone investments.
A NEW INCENTIVE FOR INVESTING
The Opportunity Zones program is designed to incentivize patient capital investments in low-income communities nationwide. All of the underlying incentives relate to the tax treatment of capital gains, and all are tied to the longevity of an investor’s stake in a qualified Opportunity Fund, providing the most upside to those who hold their investment for 10 years or more.
DID STATES MAXIMIZE THEIR OZ SELECTIONS?
The Tax Cuts and Jobs Act included a new federal incentive—Opportunity Zones—to spur investment in low-income and undercapitalized communities. This incentive could become the nation’s largest economic development “program,” but its potential for positive impact depends first on the decisions of America’s governors. April 20, 2018 was the final deadline for governors (and the mayor of the District of Columbia) to select which among the roughly 56 percent of eligible census tracts should be classified as Opportunity Zones.
TREASURY ANNOUNCES FIRST ROUND OF OPZ
The U.S. Department of the Treasury and the Internal Revenue Service (IRS) today designated Opportunity Zones in 18 States. The Tax Cuts and Jobs Act created Opportunity Zones to spur investment in distressed communities throughout the country. New investments in Opportunity Zones can receive preferential tax treatment.
LOCAL LEADERSHIP IS KEY IN OPZ
State and local leaders nationwide were surprised to learn that the Tax Cuts and Jobs Act, signed into law at the end of 2017, delivered them the most ambitious economic development investment incentive enacted since the Clinton Administration.
The new law empowers governors of every U.S. state and territory to designate “Opportunity Zones,” comprised of low-income community census tracts, where certain investments will receive a federal tax benefit.
A CATALYST FOR INNER-CITY DEVELOPMENT
Funding comes from the estimated $2.2 trillion in unrealized capital gains in stocks and mutual funds held by individuals and corporations. Funds will be able to defer and reduce federal tax liability on the sale of these assets if they channel that into an Opportunity Fund and invest in an Opportunity Zone.