On December 22, 2017, the Tax Cuts and Jobs Act created a new section of the Tax Code (26 U.S. Code § 1400Z) that provides tax incentives for investments in targeted areas in the United States through investment vehicles called Opportunity Zone Funds. The purpose of Opportunity Zone Funds is to promote economic development in these select communities, known as Opportunity Zones, by offering investors substantial federal tax advantages that are only available through the new program. By investing into an Opportunity Zone Fund, investors can not only defer and reduce their existing capital gains tax liability, but also eliminate future capital gains tax on returns earned from the Opportunity Zone Fund.
For Opportunity Zone Fund Managers
Opportunity Zones are census tracts designated by State and Federal governments targeted for economic development and approved by the US Treasury for tax incentive treatment for investment within the border.
An Opportunity Zone Fund is a new investment vehicle created as part of the Tax Cuts and Jobs Act of 2017 to incentivize investment in targeted communities called Opportunity Zones.
Opportunity Zone Funds allow investors to defer federal taxes on any recent capital gains until December 31, 2026, reduce that tax payment by up to 15%, and pay as little as zero taxes on potential profits from an Opportunity Zone Fund if the investment is held for 10 years.
The key to a successful investment and return in a qualified Opportunity Zone Fund is predicated on the fund manager’s strategy and track record and ability to demonstrate compelling returns on investment merits
On its own, the “capital gains tax deferral” through the incentive as legislated by S293 may not be compelling enough from an ROI perspective
Fund Managers who can target investment opportunities (no pun intended) in which the new Federal “incentive“ can be coupled with other State, Local and Federal tax “credits“ to greatly expand the value of their investments will be in a position to outperform their peers significantly
These are non-biased views from the team at The OIX and should not impact your investment decisions nor are they intended to be tax or financial advice
For IRS FAQs click here
Click on the map or here for interactive Opportunity Zones census
Stay tuned to The OIX as we continue to deliver Opportunity Zone insights and share how our innovative technology platform can optimize your Opportunity Zone investments
Coupling with state tax credits
Credit & Incentive stacking
Fund strategy, track record of success
Exit strategy and liquidity
Rollover after 5, 7, 10 years
As with any incentive analysis your business and investment is best served by
consulting with experts and advisors who stay ahead of the curve and whom provide guidance and strategic advice that pertains to your tax position.
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