Opportunity Zones: A Remarkable Opportunity
The 2017 Tax Act introduced a bevy of major changes to federal income tax law, but perhaps the most remarkable and daring new concept of all is "Opportunity Zones," a new community investment tool designed to stimulate investment, through tax incentives, in low income communities throughout the nation.
The tax incentives are flat out compelling: A taxpayer who reinvests gain from a sale of property into a "Qualified Opportunity Fund" enjoys the following benefits:
- Deferral: Gain reinvested in a Fund is deferred until the earlier of the date the taxpayer sells his interest in the Fund or December 31, 2026.
- Capital Gain Reduction: If the taxpayer invests in the Fund for at least 5 years, 10% of the original gain is excluded; if the investment lasts for at least 7 years, an additional 5% (for a total of 15%) of the original gain is excluded.
- Appreciation Exclusion: Best of all, if a taxpayer invests in a Fund for at least 10 years, all appreciation in that investment will be tax free on exit from the Fund.
This interactive panel discussion provided a comprehensive look at the new legislation and investigated its potential application to a variety of practical and exciting business situations. Attendees heard from practitioners and experienced real estate operators as to the implementation of this new area.
Topics addressed included the following:
- What is an Opportunity Fund, and how do you set one up?
- Where are the "Opportunity Zones?"
- Structuring transactions to comply with the legislation.
- Explanation of the tax benefits.
- How do businesses qualify to accept tax-advantaged investments from a Fund?
- Much more
Additional Resources:
Program Outline (PDF), by Joseph Darby
Opportunity Zone Overview (PDF), by Dan Ryan