Opportunity zones are designed to incentivize investment and economic development in underserved communities. Established as part of the Tax Cuts and Jobs Act of 2017, developers may use a Qualified Opportunity Fund (QOF) to help fund projects located within an opportunity zone. This new source of investment dollars could prove to be a powerful economic tool if properly administered.
Under the statute, investors can create a QOF that would allow them to realize significant tax savings, as long as 90% of the fund’s assets are invested in qualified property and businesses within an opportunity zone.
The law allows investors to defer federal taxes on any capital gains income invested in a QOF. Additional tax benefits are provided for long-term investors.
However, these tax benefits are time-constrained. The deferral expires Dec. 31, 2026, requiring investors at that point to pay taxes on any deferred gains still invested in a QOF.
More information on opportunity zones can be found in these resources and NAHB blog posts:
You can also learn more at these government links:
NAHB submitted comments to the Internal Revenue Service (IRS) on Dec. 18, 2018, on the proposed regulations regarding investing in qualified opportunity zones. NAHB believes the majority of the regulations are logical, fair and thoughtful, however, it recommends the Treasury Department and the IRS further clarify issues related to "working capital safe harbor." NAHB also commented on the "original use" requirement as it pertains to vacant or abandoned property. Read the comments.
IBS Education Session
At the 2019 International Builders' Show in Las Vegas, NAHB hosting the education session How Builders & Developers Can Use the New 'Opportunity Zone' Tax Incentive Program. You can download the handout or purchase a recording of the session to see the full presentation.
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