The 7 Most Important Things from the Latest IRS Opportunity Zone Regulations

1. It’s not just a real estate game anymore.

Under the new set of regulations, a business funded by a qualified opportunity fund and located in an opportunity zone, could qualify for the tax incentives if it meets one of three “safe harbors”: at least 50% of the hours the employees or contractors work are spent within the opportunity zone, half of the company’s services are within the area or if the management and operations are based in the designated zones.

2. Reinvestment Rule.

Qualified opportunity funds will now have a one-year grace period to sell assets and reinvest the proceeds into another opportunity zone investment.

3. What happens if a property in an opportunity zone straddles over a non-opportunity zone area?

If the majority of a property (based on square footage) is located within a qualified opportunity zone compared to the amount of its property outside of the zone and that “property outside of the zone is contiguous to part or all of the real property located inside the zone, then all of the property would be deemed to be located within a qualified zone.”

4. Vacant Properties.

Under the new regulations, the government says a building or other structure that has been vacant prior to being purchased by a qualified opportunity fund will satisfy the original use requirement. In short, the investor will not need to meet the substantial improvement provision.

5. What happens if a QOF investor dies during the investment period?

Upon the death of an investor, the investment will be passed on. The heirs of the investor will now receive the benefits from the original QOF investment.

6. No triple-net leases.

Triple net leases will not be part of the opportunity zone program. Businesses taking advantage of the opportunity zone program have to be active, and the main benefit of a triple net leased property is the passivity it allows the owner.

7. The White House is all-in on Opportunity Zones.

The White House Opportunity and Revitalization Council chaired by Ben Carson will be supported by five subcommittees that will focus on identifying, targeting and streamlining federal program efforts to these opportunity zones.

Read the full BISNOW guidance re-cap HERE. 

Explore Sixty West Funds approach to Opportunity Zones HERE.