Locke Lord’s Opportunity Zones team addresses specific client needs and questions on the Treasury Department’s “Opportunity Zones” program. While the incentives of Opportunity Zones are potentially quite significant, the rules are complicated.
The Tax Cuts and Jobs Act added the Opportunity Zones concept as Section 1400Z to the Internal Revenue Code, which is designed to incentivize private investment in low income areas. That section of the Code allows the governors of each state to designate certain low income census tracts as an Opportunity Zone, and the governor of every state has done so. To participate, investors must create an Opportunity Fund (OF) to invest in new projects in an Opportunity Zone, typically with moneys obtained from the recent sale of existing assets. The benefits to the OF investors are the possible deferral and reduction of federal income tax on any capital gain that arose from the sale of those existing assets and may arise in the future from a subsequent sale of the investor’s interest in the OF. Unlike previous congressional attempts to spark investment in low income areas, the Opportunity Zones legislation is meant to make investment in these census tracts relatively easy, unlimited and unburdened by unrealistic requirements.
The Locke Lord Opportunity Zones team has been actively working on those investments and advising clients with
- Creation of an OF;
- investment in, and qualifying investments made by, the OF;
- construction of projects in the Opportunity Zones; and
- federal income tax consequences resulting from those transactions.
In addition, our core Opportunity Zones team will involve Locke Lord lawyers with knowledge and specific experience on a zone-by-zone basis.