New Community Development program for investors

12/18/2018, 9:56 p.m.


Established by Congress in the Tax Cuts and Jobs Act of 2017, a new Opportunity Zone legislation is a community development program to encourage long-term investments in low-income US communities.

Fund managers and commercial investors are exploring the tax benefits of Opportunity Zones, and some, according to investors say they intend to make this part of future commercial real estate investment strategies. In fact, a new marketplace has been launched to provide the average accredited investor with access to newly formed Opportunity Zone Fund investments.

“That said, there are tax benefits that cannot be ignored by everyday accredited investors,” says Adam Hooper, Community Development program manager. “One of the hallmarks of our platform is that we provide investors with access to opportunities that were previously only available to the most elite or largest investment firms. Opportunity Zone investments certainly fall into this category. Without this new marketplace, many investors would miss the opportunity to take part in what is likely to become a key investment strategy over the next decade. Our role is to extend these benefits to all accredited investors.”

Q. What is an Opportunity Zone?

*A) A Opportunity Zone is an economically-distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment. Localities qualify as _Opportunity Zones if they have been nominated for that designation by the state and that nomination has been certified by the Secretary of the U.S. Treasury via his delegation of authority to the Internal Revenue Service.

*Q. How were Opportunity Zones created?

*A) Opportunity Zones were added to the tax code by the Tax Cuts and Jobs Act on December 22, 2017.

*Q. Have Opportunity Zones been around a long time?

*A) No, they are new. The first set of Opportunity Zones, covering parts of 18 states, were designated on April 9, 2018. Opportunity Zones have now been designated covering parts of all 50 states, the District of Columbia and five U.S. territories.

*Q. What is the purpose of Opportunity Zones?

*A) Opportunity Zones are an economic development tool—that is, they are designed to spur economic development and job creation in distressed communities.

*Q. How do Opportunity Zones spur economic development?

*A) Opportunity Zones are designed to spur economic development by providing tax benefits to investors. First, investors can defer tax on any prior gains invested in a Qualified Opportunity Fund (QOF) until the earlier of the date on, which the investment in a QOF is sold or exchanged, or December 31, 2026. If the QOF investment is held for longer than 5 years, there is a 10% exclusion of the deferred gain. If held for more than 7 years, the 10% becomes 15%. Second, if the investor holds the investment in the Opportunity Fund for at least ten years, the investor is eligible for an increase in basis of the QOF investment equal to its fair market value on the date that the QOF investment is sold or exchanged.

*Q. What is a Qualified Opportunity Fund?

*A) Qualified Opportunity Fund is an investment vehicle that is set up as either a partnership or corporation for investing in eligible property that modeling in a Qualified Opportunity Zone.

*Q. Do I need to live in an Opportunity Zone to take advantage of the tax benefits?

*A) No. You can get the tax benefits, even if you don’t live, work or have a business in a Opportunity Zone. All you need to do is invest a recognized gain in a Qualified Opportunity Fund and elect to defer the tax on that gain.

*Q. I am interested in knowing where the Opportunity Zones the. Is there a list of Opportunity Zones available?

*A) Yes. The list of designated Qualified Opportunity Zones can be found at Opportunity Zones Resources and in the Federal Register at IRB Notice 2018-48. Over the next few months, the Treasury Department and the _Internal Revenue Service will be providing further details at www.Treasury.gov and www.IRS.gov. - MG Media