Qualified Opportunity Zones were designated by the federal government pursuant to the U.S. Tax Cuts and Jobs Act of 2017. The adoption of this legislation in December 2017 established the “opportunity zone” program to provide tax incentives for long-term investing in designated economically distressed communities. Designated areas were identified by official in each state and confirmed by the Tax Department.
Private investors that invest in such designated and qualified opportunity zones, received tax benefits. Generally speaking, the tax benefit is a deferral of capital gains for up to seven years, with opportunities for a step-up in basis on deferred gains. And there is the prospect for the investor of ten years of tax-free investment growth in the opportunity zone.
Project feasibility, due diligence, and other underwriting matters are just a bit more complex since an investment through the Opportunity Zone constitutes a security within the meaning of federal and state laws except in limited circumstances. such qualified opportunity funds must comply with all applicable regulations of the SEC and the securities regulators in the states where they are doing business, in addition to other applicable regulations, such as those of the Internal Revenue Service and Treasury Department.
In answering, what are qualified opportunity zones, we would return to the legislative intent. The adoption of the Tax Cuts and Jobs Act in December 2017 established the “opportunity zone” program to provide tax incentives for long-term investing in designated economically distressed communities. For the program to prosper it will need to deliver on this original objective, creating tangible investments at significant scale in communities that have long been ignored.