The Tax Cuts and Jobs Act of 2017 added Opportunity Zones to the Internal Revenue Code to spur economic development and job growth in distressed communities by attracting private capital investment to those communities. Federal income tax benefits are available to taxpayers who reinvest their capital gains in a Qualified Opportunity Fund (QOF) – an investment vehicle organized as a corporation or partnership. The potential investor base for this program is extraordinary – it is estimated that as much as $6 trillion of unrealized capital gains may exist in capital assets that are eligible for re-investment in the OZ program.
More than 8,000 Opportunity Zones throughout the United States (including Puerto Rico) have been designated for investment by the IRS. Opportunity Zones keep their designation for 10 years. After the Opportunity Zone designation expires, however, taxpayers may elect to step-up their basis in an QOF investment that they have held for 10 years. The deadline to make the election extends through 2047. Investors do not need to live, work or conduct business in an Opportunity Zone to take advantage of the tax benefits – they only need to invest in a QOF. The QOF is capitalized with investors’ capital gains realized from other investments, such as proceeds from the sale of a business or stock.
Robinson+Cole’s lawyers give legal advice regarding development strategies that can help realize the full benefit and unlock the economic potential that Qualified Opportunity Zone investments have to offer. Drawing upon our related experience in tax credit and community development financing, our Opportunity Zone and Impact Investments Team advises on the following key services.
Closed a $10 million Qualified Opportunity Fund investment representing investor client with capital gain tax liability seeking to take advantage of the tax deferral and reduction benefits of the Opportunity Zone program.
Represented equity investor client in tiered investment structure incorporating a Qualified Opportunity Fund purchasing Qualified Opportunity Zone business interests in the form of a real estate partnership acquiring and developing property in a Qualified Opportunity Zone in the New York metro area.
Represented client in review and structuring of real estate equity investment in opportunity zone property through a special purpose qualified opportunity fund and set forth tax structuring requirements for qualified opportunity zone business investment vehicle.
Counsel to developer team structuring options around sale and development of opportunity zone property.
Represented client in sale of property located in opportunity zone with regards to QOZB related party rules and follow on investment options with capital gains.