Opportunity Zones (OZ) are all the rage now. Pick up a newspaper or trade magazine, and you’re likely to see an article about them. And, of course, investors are discussing them as well.
But what is an OZ, and why should you care? Here’s what you need to know:
- The Internal Revenue Service defines an OZ as “an economically-distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment.”
- OZs were created by the Tax Cuts and Jobs Act.
- OZs are intended to spur economic development and job creation in distressed communities.
- Qualified Opportunity Funds (QOF) are the vehicles used to invest in OZ property.
- OZs spur economic development by providing tax benefits to investors. Investors can defer taxes on any prior gains invested in a QOF, and if the investment is held for certain periods, some of that gain is excluded. If the investor holds the investment in the QOF for at least 10 years, that investor is eligible for an increase in basis on the investment equal to its fair market value on the date the investment is sold or exchanged.
- OZs have been designated in all 50 states, the District of Columbia and five U.S. territories.
- A list of qualified OZs can be found at https://www.cdfifund.gov/Pages/Opportunity-Zones.aspx.
Consult your tax advisor to learn more about OZs. For more information, use the contact information below.