Qualified Opportunity Zone Funds

Highlights


The most talked about fund structure over the past 12 months–the Qualified Opportunity Zone Fund (“QOF”)–is any investment vehicle organized as a corporation or partnership for the purpose of investing in Qualified Opportunity Zone Property.

  • The Tax Cuts and Jobs Act of 2017 created a new tax incentive program for investments in Opportunity Zones (“OZ”) – FAQ below
  • Individuals and other entities can delay paying federal income tax on realized capital gains until as late as December 31, 2026 if those gains are invested in a QOF.
  • The gains on investments in the QOF can be federal income tax-free if the investment is held for at least 10 years.

Additional Details

90% of fund assets must be held in Qualified Opportunity Zone Property.

Qualified Opportunity Zone Property includes Qualified Opportunity Zone Business Property, which is tangible property used in a trade or business of the QOF, provided:

  • The QOF acquired the property after 31-Dec-2017;
  • The original use of such property within the OZ commences with the QOF; and
  • During the holding period, substantially all of the use of such property was within the OZ.

Opportunity Zone FAQs

An 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.

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

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.

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

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

No. You can get the tax benefits, even if you don’t live, work or have a business in an 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.

Yes, a LLC that chooses to be treated either as a partnership or corporation for federal tax purposes can organize as a Qualified Opportunity Fund.