The 2017 Tax Cuts and Jobs Act established a section of the tax code that allows taxpayers to utilize a new investment vehicle called Opportunity Funds, in an effort to bring resources to low income communities known as Opportunity Zones.
What is an Opportunity Zone?
The Internal Revenue Service (“IRS”) describes the Opportunity Zones as economically-distressed communities where new investments may be subject to preferential tax treatment, according to the criteria laid out in the Tax Cuts and Jobs Act. These low-income communities must be designated as a qualified Opportunity Zone in order to benefit from the tax incentives and each state has a limited number of “population census tracts” (neighborhoods as determined by the Bureau of Census) that can be designated as qualified Opportunity Zones.
How are Opportunity Zones Created?
Opportunity Zones are designated
What are the Benefits of Investing in Opportunity Zones?
- You can defer the capital gain tax
- Possible reduction of the amount of gain realized through a basis adjustment; and
Possible permanent exclusion of gain on the appreciation for the interest in an Opportunity Fund