Opportunity Zone Tax Incentive

15 Nov 2019

Opinion: Opportunity Zones Offer Potential For Positive Change

How rural areas can benefit from the new federal tax program that incentivizes investors to develop in low-income communities.

A product of the Tax Cuts and Jobs Act of December 2017, opportunity zones were created to spur development in disadvantaged communities nationwide by offering investors incentives in the form of capital gains tax breaks.

With the right combination of factors in place, opportunity zones can truly live up to their name by igniting sustainable economic activity that lifts prospects for communities, and offers transformative potential to operating companies and startups.

Opportunity zones are designated low-income communities based on median family incomes or poverty rates. Oregon’s 834 low-income census tracts are largely urban, with 21% in rural areas. The state has 86 designated opportunity zones. While Multnomah County, including downtown Portland, claims 17 of the zones, 31% are in rural areas.

Written by Michael Sander | Posted in Opportunity Zone Tax Incentive

25 Jun 2019

Opportunity Zone Participation Window Expires June 28, 2019 For Those Who Want To Participate For 2018 Capital Gains

Taxpayers wishing to participate for any calendar 2018 capital gains must act quickly.

The Opportunity Zone (OZ) Program, ushered in as part of the 2017 Federal Tax Cut & Jobs Act, includes one of the most powerful and flexible tax planning provisions in decades. The Program allows taxpayers who are generating capital gains from real estate sales, stock sales, artwork, Bitcoin, vehicles, intangibles and most other assets to roll over all or a portion of the gain into a Qualified Opportunity Fund (QOF) and achieve the following benefits:

Defer reporting the initial tax gain until December 2026.
Earn a 10% tax basis increase in their QOF investment in Year Five and another 5% increase in Year Seven – resulting in a permanent tax reduction.
Most importantly, gains accruing after the investment into the QOF will be 100% tax-free upon sale if the investment is held for at least 10 years.

The challenge for many is to roll those gains within 180 days from when the tax gain is reportable. As a result, action must be taken no later than June 28^th, 2019 to participate in the OZ Program for any eligible calendar 2018 tax gains.

Two important ways to participate while window of Opportunity is still open

Written by Blake Christian | Posted in Opportunity Zone Tax Incentive

05 Apr 2019

The Federal Opportunity Zone Program – Overview

The 2017 Tax Cut and Jobs Act (2017 Act) created the federal Qualified Opportunity Zone program (QOZ or Program) effective in 2018 and operative up to the next three decades.

Beginning January 1, 2018, through December 31, 2026, individuals, corporations, REITs, and pass-through entities can sell their appreciated capital assets and elect to reinvest the resulting capital gain into a Qualified Opportunity Fund (QOF). The federal tax impact of participating in a QOF includes deferring qualified gains for up to eight years and permanently exempting up to 15% of the original federal gain and 100% of the post-reinvestment gain – after holding the investment for seven and ten years, respectively. State conformity to this law is varied and requires careful state-by-state analysis.

The Program offers a powerful and flexible tax savings and diversification tool for taxpayers generating capital gains. To participate, taxpayers must roll all (or a portion) of their capital gains (whether short-term or long-term) into a QOF. The QOF must then timely (180-day window discussed below) invest the gain into undeveloped or developed real estate, a new or existing QOZ-based business, or into other qualified QOZ property. While most of the focus is on real estate projects, the Program also provides significant potential benefits for taxpayers investing in active businesses that operate primarily within a QOZ. A future sale of an active business at multiples of 6- to 8-times EBITDA can easily eclipse a healthy real estate appreciation.

Written by Kat Jennings | Posted in Opportunity Zone Tax Incentive

28 Feb 2019

Opportunity Zone Executive Summary: Investment Diversification And Tax Savings Tool

Blake Christian Executive Summary On Opportunity Zones

The Tax Cut and Jobs Act created the federal Qualified Opportunity Zone (QOZ) program that became effective in 2018 and will be operative for up to the next three decades. Effective January 1, 2018, through December 31, 2026, individuals, C and S Corporations, REIT’s, partnerships and other pass-through entities can sell their appreciated capital assets and elect to reinvest the resulting capital gain income into a Qualified Opportunity Funds (QOF), in order to defer the tax on those gains for up to eight years and permanently exempt up to 15% of the original federal gain and 100% of the post-reinvestment gain. California has indicated they will not be conforming to the federal rules, while Utah likely will, and investors must carefully evaluate the state impact of any reinvestment.

The QOZ program offers flexible tax savings and diversification tool for taxpayers generating larger gains. To participate in the QOZ program, the taxpayer must roll all or a portion of their short-term or long-term capital gain into a QOF within 180 days of the recognition date of the gain. The QOF must then timely invest the deferred gains into undeveloped or developed real estate, a new or existing QOZ-based business, or other qualified QOZ property.

Written by Blake Christian | Posted in Opportunity Zone Tax Incentive

19 Feb 2019

Opportunity Zone Program – Federal Qualified Opportunity Zones

A Tax Deferral Tool

The 2017 Tax Cuts and Jobs Act (P.L. 115-97) introduced the Qualified Opportunity Zone (“QOZ”) program under I.R.C. Section 1400Z-1 and 1400Z-2. The QOZ program is an economic development platform intended to encourage private investment into low-income communities throughout the United States and U.S. territories and is generally effective January 1, 2018, through December 31, 2026.

Federal Tax Deferral

The QOZ gives taxpayers a federal tax deferral (as well as a potential partial permanent tax savings) of realized capital gains on the sale of appreciated assets. The taxpayer will still need to recognize the ordinary gain portion on the initial sale, but can effectively defer the portion of the gain subject to 20% or 23.8% capital gains tax, depending on the taxpayer’s specific facts and circumstance. For example, taxpayers will experience different marginal rates depending if the original investment was active, passive, or investment portfolio activity. Note that further guidance from the Internal Revenue Service (“IRS”) is required in this area.

Written by Blake Christian | Posted in Opportunity Zone Tax Incentive

01 Feb 2019

Tax Reform Creates Opportunity Zone Tax Incentive

Qualified Opportunity Zones were created by the 2017 Tax Cuts and Jobs Act. These zones are designed to spur economic development and job creation in distressed communities throughout the country and U.S. possessions by providing tax benefits to investors who invest eligible capital into these communities. Taxpayers may defer tax on eligible capital gains by making an appropriate investment in a Qualified Opportunity Fund and meeting other requirements.

In the case of an eligible capital gain realized by a partnership, the rules allow either a partnership or its partners to elect deferral. Similar rules apply to other pass-through entities, such as S corporations and its shareholders, as well as estates and trusts and its beneficiaries.

Written by IRS | Posted in Opportunity Zone Tax Incentive • TaxConnections