What are Opportunity Zones or O-Zones?
Tax reform legislation presented a significant opportunity for investors to defer capital gains tax owed. The benefits are for those capital gains that arose in the last 180 days or prospectively in 2018 and future years.
The establishment of newly created Federal Opportunity Zones (“O-Zones”) was added to the Internal Revenue Code as new IRC Sections 1400Z-1 and 1400Z-2. The O-Zones offer an opportunity for investors to defer tax on capital gains by investing in Qualified Opportunity Funds (“O-Funds”), which in turn make investments in property (stock, partnership interest or tangible personal property) in the designated O-Zones.
What are Opportunity Funds or O-Funds?
O-Funds are investment vehicles (partnerships or corporations) created for the main purpose of reinvesting monies realized from an event triggered by a sale resulting in a capital gain within those designated O-Zones. As of July 31, 2018 regulations have not yet been published by the Treasury or the IRS.
Who qualifies for O-Zones?
Each state has nominated low-income census tracts and subsequently approved by the Treasury. All U.S. States, the District of Columbia, and five territories have qualifying census tracts now available to qualify for investment. Below is an interactive map of PA's Qualified Opportunity Zones from the PA Department of Community & Economic Development.
Per the Internal Revenue Bulletin 2018-28 issue by the Internal Revenue Service on July 9, 2018, they have designated 8,849 census tracts, with California being the highest with 882 and ten states each with 25 tracts.
What are the benefits to be gained?
How can we help?
Contact us at 717-569-2900 for more information on this unique tax planning opportunity.