Affordable Housing Blog
   
Subscribe:  
Share Print View
What is the Opportunity Zone?
The recent tax law, Public Law 115-97 (the “Tax Act”) enacted the new Opportunity Zone programs.  We have issued three Alerts on this topic (https://www.nixonpeabody.com/en/ideas/articles/2018/02/15/real-estate-qualified-opportunity-zones; https://www.nixonpeabody.com/en/ideas/articles/2018/02/12/new-tax-act-provides-potential-redeveloping-closed-coal-fired-power-plants;   https://www.nixonpeabody.com/en/ideas/articles/2018/01/18/investing-in-opportunity-act).   However, we are already near the end of the phase for designating opportunity zones under the Tax Act.  Our blog last Friday noted great links for Massachusetts.  Most states have their own designation websites and you can also consult the federal site.  The following Information Resource can be accessed at https://www.cdfifund.gov/Pages/Opportunity-Zones.aspx.

Governors cannot designate more than 25% of a state’s low-income community (“LIC”) census tracts (if fewer than 100 such tracts, then the State is limited to 25 QOZs).  Eligible LIC areas are basically those that qualify for the New Markets Tax Credits (“NMTCs”). Non-LIC contiguous tracts can be no more than 5% of the tracts designated in a State. Designations are due by March 21, 2018; however, Governors may request a thirty-day extension of this deadline to April 20, 2018. 
The Opportunity Zone Act is codified in Sections 1400Z–1 and 1400Z–2 of the Internal Revenue Code.  On February 8, 2018, the IRS published clarifying guidance in Rev. Proc. 2018-16. The Investment in Opportunity Act requires the designation of“Qualified Opportunity Zones” (“QOZs”) within low-income communities. Investors can create “Qualified Opportunity Funds” (“QOFs”) – private sector investment vehicles to fund development and redevelopment projects in QOZs.  Investors, which can be individuals or corporations, can achieve a tax deferral, and possible exclusion, for capital gains that are reinvested into a QOF.  If a taxpayer generates capital gains and invests that amount into a QOF within 180 days, the tax will be deferred until the fund investment is sold or exchanged. If the taxpayer holds the investment for five years, the taxpayer will pay only 90% of the original gain. If the investment is held for seven years, only 85% of the original gain will be recognized. If the investment is held for ten years, the increase in the value of the fund investment is excluded from taxation.  The deferred gain is recognized on the earlier of sale of the QOZ investment or December 31, 2026. And, the deferral must be invested before December 31, 2026. 

Comments

There are no comments yet for this post.

Privacy Policy | Terms of Use and Conditions | Statement of Client Rights
This website contains attorney advertising. Prior results do not guarantee a similar outcome. © 2018 Nixon Peabody LLP
Categories
expand 1. HUD / RD

AFHS alerts
Elderly Housing -- Section 202
FHA Insurance and Risk Sharing
Preservation - HUD OAHP and Mark to Market
RAD
Section 8 Renewal Contracts
Utility Allowance
expand 2. Local & Regional

California and West Coast
DHCD (DC)
Housing Production Trust Fund
New York and Northeast
expand 3. Energy Tax Credits

expand 4. Historic Rehabilitation Tax Credits

Historic Rehabilitation Tax Credits
expand 5. Low-Income Housing Tax Credits

expand 6. New Markets Tax Credits

New Markets Tax Credits
expand 7. Real Estate

Tax
expand 8. Specialty

Freddie Mac
LGBT Housing
Sequestration
Tax-exempt Entities
expand 9. Video

Video