Three Things You Need to Know About Opportunity Zone Tax Incentives with New Developments

December 6, 2019

By: Ross Boardman, Angela Brown, and Steven Gluck

While the enactment of the TCJA and its stemming tax consequences have received mixed results, many taxpayers should be pleased with the opportunities that Qualified Opportunity Zones (“QOZ”) offer. Qualified Opportunity Zones are governor designated areas in each state that have been identified as underappreciated and underutilized. Quite simply put, the governors believe with a little love from the business community and investors, these areas can serve their communities at the highest level. While some details are still emerging, Aprio is here to guide you through your Opportunity Zone Fund inquiries. There are multiple dates, thresholds and tests to keep in mind when dealing with the Qualified Opportunity Zone Funds, so we wanted to highlight a few brief details.

For starters, plan ahead when you sell any shares in the stock market, sell business interests, or sell fixed assets. You only have 180 days from date of sale or from the partnership fiscal year end to reinvest these gains. Be prepared to invest for the long haul. While many real estate professionals may be used to three to five year holding periods, it is important to hold your QOZ investment for 10 years in order to receive the full step up in basis of your investment. Pay attention to what states you invest in and whether they have conformed to the TCJA (of note, California and North Carolina have not). Most importantly, make sure your investment is a good business deal rather than just a tax savings opportunity.

These tidbits only scratch the surface of the intricacies with investing in and forming Qualified Opportunity Zone Funds. However, we hope that Aprio can help you in taking advantage of this tax saving opportunity.

Here is a link to the webinar to learn more:

New Developments after Webinar Issued:

Recently Qualified Opportunity Zones have made headlines, in that they may not be as helpful to the less fortunate as previously promised. Senator Wyden (D-Ore.) introduced legislation to reform the Qualified Opportunity Zones. If passed, this bill would require annual public information reporting from Opportunity Funds and annual statements to the IRS from fund investors. It would also disallow certain investments from the benefits of a Quality Opportunity Zone such as stadiums, self-storage and luxury apartments. In addition, zones that are not low-income or impoverished would be eliminated and give states the option to replace these zones with others.

There are currently two proposed regulations for Qualified Opportunity Zones, released October 2018 and April 2019. These two proposed regulations are expected to be combined into one final regulations package before 2019 year-end. Additionally, the draft Form 8996 for Qualified Opportunity Funds (QOFs) has been released.

For questions, or more information, contact Angela Brown, senior manager, at [email protected], or Ross Boardman, tax manager at [email protected].