Connecting OPZ investors & businesses with qualified Opportunity Zone property

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Summary of October 19, 2018 OZ Guidance (as provided by Fundrise). The Opportunity Zone program was created under the Tax Cuts and Jobs Act and went into effect on January 1, 2018. The proposed regulations, released on October 19, 2018, provide additional guidance for potential investors under new US Code section 1400Z-2, clarifying several key issues which were not addressed in the Tax Cuts and Jobs Act. In this article, we discuss the most consequential elements of the guidance that was released and how it will impact both Opportunity Zone investors and potential Opportunity Zone investments.

Meet the Designer of OP Zones

Steve Glickman, co-founder and executive director of the Economic Innovation Group, discusses Opportunity Zones and Opportunity Funds, entirely new incentive-rich methods for venture capitalists and entrepreneurs to invest in economically depressed regions.

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 Ever

"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.

Opportunity Zones FAQ

Qualified Opportunity Zones were created by the 2017 Tax Cuts and Jobs Act. These zones are designed to spur economic development and job creation in distressed communities throughout the country and U.S. possessions by providing tax benefits to investors who invest eligible capital into these communities. Taxpayers may defer tax on eligible capital gains by making an appropriate investment in a Qualified Opportunity Fund and meeting other requirements.

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.

Opportunity Zone Resources

In addition to an initial set of proposed regulations and guidance on how the Qualified Opportunity Zone (QOZ) tax benefits under IRC 1400Z-2 (including the certification of Qualified Opportunity Funds (QOFs) and eligible investments in QOZs) will be administered, Treasury and IRS have issued a second set of proposed regulations relating to gains that may be deferred as a result of a taxpayer's investment in a QOF, special rules for an investment in a QOF held by a taxpayer for at least 10 years, and updates to portions of previously proposed regulations under section 1400Z-2 to address various issues, including: the definition of “substantially all.”