During the past year, each state, in cooperation with the U.S. Department of Treasury, has designated certain census tracts as “opportunity zones.” Under the opportunity zone rules, a taxpayer can elect to defer certain capital gains if those gains are invested in a qualified opportunity zone fund. Qualified opportunity zone funds, in turn, are required to invest at least 90% of their assets in certain qualified opportunity zone property, which can include the substantial improvement of existing assets or the construction of new assets on greenfield properties. In addition to a temporary deferral of capital gains, opportunity zone legislation provides taxpayers with
- a partial step-up in tax basis on the invested capital gains if certain holding periods are satisfied and
- a permanent exclusion of all gains generated by the qualified opportunity zone fund if the investment is held for at least 10 years.
Significant portions of the urban core of major U.S. cities have been designated as opportunity zones, and those same city blocks are most ripe for social infrastructure development. If properly structured, social infrastructure development in opportunity zones could benefit from significantly increased returns on equity.
Read the full National Law Review article HERE.
Learn more about Opportunity Zone Funds and the Sixty West approach to investment HERE.