March 27, 2019
How to Seize the Opportunity of Opportunity Zones
In December of 2017, the IRS announced an exciting new program that will offer substantial tax benefits for both developers and investors: Opportunity Zones. This program is still very new, but we’re already working with clients to help them reap the financial benefits.
“Opportunity Zones are a huge development and have the potential to change the game for willing developers and the communities they serve,” says Grimbleby Coleman Principal and CPA Nate Miller. “But this program is not permanent, so now is the time to capitalize.”
What is an Opportunity Zone? The IRS defines an Opportunity Zone as an economically distressed community where new investments may be eligible for preferential tax treatment. Projects in the zone must be related to real estate, infrastructure, equipment, or business.
Why develop in one? Developing in an Opportunity Zone will surely make your project more profitable in the long run as you or your investor(s) reap greater tax benefits. To maximize your investment, you’ll want to make sure that your Opportunity Zone project is a shovel-ready marketable asset that provides a return on investment.
Where can I find an Opportunity Zone? Opportunity Zones in our area fall within San Joaquin, Stanislaus, and Merced counties. For a detailed map of specific areas, click here.
Are there any special considerations? To invest in an Opportunity Zone, you’ll need to move your money for the project into an Opportunity Zone Fund. Creating the fund and getting it certified with the IRS is simple: Just fill out a form and designate a funding source. You can use an existing fund, gather other investors to create a fund, or create a new one. In practice, the fund itself is similar to a mutual fund. However, the rules for qualifying and maintaining the fund’s special status are complex. At this point, we are also waiting to see the final IRS regulations that are currently a work in progress.
What are the benefits? The biggest benefits are the chance to defer capital gains tax from the original sale for up to 8 years, exclude up to 15% of the original gain and exclude ALL of the gain eventually recognized upon the sale of the qualified reinvestment. The Opportunity Zone program is set to sunset on Dec. 31, 2026.
If you’re interested in taking advantage of this exciting program, call us to set up an appointment at (209) 527-4220 or contact Nate Miller at firstname.lastname@example.org. We can walk you through the process, discuss in more detail the benefits provided with the program, and determine how such an investment fits into your overall business strategy.