Tag Archive for Opportunity Zones

Opportunity Zone Investing In The Covid-19 ERA

Opportunity Zone Investing In The Covid-19 ERA

Q1. The government has tried to help millions of taxpayers and small businesses during the Covid-19 crisis. Do you think Opportunity Zone (OZ) investors and funds will receive any relief?

BLAKE CHRISTIAN: Actually, the final OZ regulations provided extremely liberal rules regarding when the 180-day reinvestment for funding a Qualified Opportunity Fund (QOF) period starts. In the fairly common situation in which a gain is flowing through to a taxpayer on a schedule K-1 from a partnership, S Corp or a trust, the reinvestment period for calendar 2019 capital gains begins on March 15th and runs through September 10th, 2020, provided the taxpayer elects an early application of the final regulations.

Q2. Why hasn’t the IRS done more?

BC: Actually, it did. In early April, the IRS issued Revenue Procedure 2020-23, which provides a sliver of an extension for investors who had a direct capital gain in the last quarter of 2019 (that did not flow through on a K-1). If a normal 180-day reinvestment period was set to expire between April 1, 2020 and July 14, 2020, the Revenue Procedure extends the deadline until July 15, 2020 – a small crumb for a handful of OZ investors. Various OZ trade groups are continuing to push for a longer extension.
Once the OZ Funds are dropped down into the QOZB subsidiary, the investors receive a minimum of 31 months, and as long as 62 months to, acquire Qualified Opportunity Zone Business Property (QOZBP). The regulations also provide for the possibility of an additional 24 months when there is a national disaster declared in the taxpayer’s business location.
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TaxConnections Reaches Out To Leading Tax Expert Blake Christian On Opportunity Zones During This Time

Opportunity Zones During Pandemic

We asked TaxConnections Member and leading tax expert Blake Christian, Tax Partner, HCVT, Long Beach, CA/Park City, Utah about the impact on Opportunity Zones during this time. The goal of my questions to Blake was gathering how the pandemic affects Opportunity Zones and advice on strategies moving forward. TaxConnections genuinely appreciates Blake’s input as he offers very valuable insight as a known expert retained by many firm partners nationally to set up Opportunity Zone structures properly for their clients.

Q. Can you tell me how a company or investor will be impacted in terms of Opportunity Zones?

A. Companies and individual investors who are considering, or have already invested into, Opportunity Zone projects will not be un-nerved as much as short-term investors since they are essentially locked into an investment period of ten years or more.
Investors who bailed out of the stock market early and generated large tax gains should look to Opportunity Zone investment opportunities as an alternative investment.

Q. What can organizations do without people having touch points or coming in contact with each other on Opportunity Zones?

A. Aside from site visits related to real estate projects, virtually all of our 40+ Opportunity Zone projects have not required face-to-face interaction and the various clients and advisors are invariably in different cities – so conference calls and video conferencing has worked very well.

The cancellation of various OZ conferences where we can network and share best practices is a clear loss for the short-term – but I foresee this only being an issue for the next 6 to 8 weeks if Americans use common sense.

Q. Any ideas what we could present to the President’s Council on Opportunity Zones regarding current crisis?
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Opportunity Zones: The Next Tax Shelter?

Mitchell R Miller

The 2017 Tax Cuts and Jobs Act provided new benefits to taxpayers to encourage investment in economically disadvantaged areas. The benefits are extensive but they require careful compliance with the regulations governing the new program.

The Opportunity Zone program permits people to invest the proceeds of a recent capital gain in one or more designated “Qualified Opportunity Zones” to defer and reduce that original capital gain.

A. Here’s how it works:

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It Started With A Million Dollar Bet – The Opportunity Zones

Opportunity Zones

One of the least-known benefits of the Tax Cuts And Jobs Act is the Investing in Opportunity Act which promises to pump a massive amount of cash into America’s most impoverished communities by offering investors and corporations the opportunity to reduce capital gains tax.This bill amends the Internal Revenue Code to authorize the designation of opportunity zones in low-income communities and to provide tax incentives for investments in the zones, including deferring the recognition of capital gains that are reinvested in the zones.

Qualified Opportunity Zones are specific geographic locations, within the United States and its territories, where investors can decrease, defer, and in some instances, completely eliminate taxes on capital gains when they invest in a property, business or business asset inside the Opportunity Zone via a Qualified Opportunity Fund.

According to a recent Forbes article, the genesis for the Opportunity Zone law traces back to entrepreneur Sean Parker searching for a way to help to turn around poverty stricken areas.  He was determined to figure out a way to get wealthy investors sitting on large capital gains to invest their money in places they normally would not invest. Parker’s Economic Innovation Group focused on using tax policy to entice investors in revitalizing poor neighborhoods.  Entrepreneur and venture capitalist Peter Thiel who co-founded PayPal bet Sean Parker he could not get it done. This motivated Sean Parker even more towards the creation of the Opportunity Zone tax policy. Working with an impressive team of bi-partisan leaders in the Executive Branch, Congress and the private sector, Sean Parker certainly has earned that million dollar bet by now.

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The Federal Opportunity Zone Program – Overview

Blake Christian On Opportunity Zones

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.

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