start a new business or relocate an existing one into an OZ

As we enter into the third year of the federal Qualified Opportunity Zone (QOZ) program we have a slightly clearer picture of how taxpayers are using this flexible and impactful program.

Not surprisingly, the vast majority of early Qualified Opportunity Funds (QOFs) formed through Dec. 31, 2019 are focused on real estate projects as they begin directing their investments into Qualified Opportunity Zone Businesses (QOZBs). Preliminary reports in 2019 indicated that only about 5% of public QOFs were focused on operating businesses. However as the Treasury Department provided more guidance through new sets of proposed and final regulations, taxpayers and the OZ community have come to realize that using the OZ program for operating businesses can yield even greater long-term benefits for both OZ communities and investors compared to real estate projects alone.

OZ PROGRAM PARTICIPATION

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BLAKE CHRISTIAN _opportunity zone frequently asked questions

The federal Opportunity Zone (OZ) Program was enacted as part of the 2017 Tax Act. Two sets of lengthy Proposed Regulations were issued in 2018 and early 2019. On December 18th Treasury and the IRS issued 544 pages of Final Regulations, including an extensive preamble.

Consistent with the Proposed Regulations, Treasury attempted to interpret the OZ statute in the most taxpayer friendly
ways. The Final Regulations (“Regulations”) are being well-received by OZ investors, OZ Fund managers and OZ consultants. We anticipate that OZ fund investing will see renewed momentum as a result of the clarity in these regulations, as well as the December 31st deadline for maximizing the OZ benefits.

The Regulations will generally become effective 60 days from December 18th, but taxpayers can elect to adopt
them earlier.

A discussion of the most significant provisions are summarized below:

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