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Opportunity Zone Program


Seizing the Opportunity

Created by the Tax Cuts and Jobs Act of 2017, the Opportunity Zone Program drives private investment to urban and rural low-income communities. Those willing to invest in areas designated as "Qualified Opportunity Zones" are eligible for preferred tax treatment of their capital gains. The program is designed to spur private investment in small businesses and in commercial and housing projects in low-income areas. The official U.S. Treasury map of designated Qualified Opportunity Zones can be found here.
 
How Ice Miller Can Help

Ice Miller is already representing clients in Opportunity Zone transactions and fund formations, bringing a focused, multidisciplinary approach to each representation. Our Opportunity Zones team is comprised of tax, real estate, private equity/fund formation, private wealth and municipal finance professionals, each committed to providing his or her expertise to advance client interests in exploring this new and exciting program. We are particularly focused on leveraging our deep experience in federal, state and local tax incentive programs (such as federal and state tax credits, TIF dollars and tax-exempt bonds) in order to provide creative and, in some cases, multi-layered financing options to maximize benefits for high-impact projects for low-income communities when taken together with Opportunity Zone investments.
 
Program Features

Favorable Capital Gains Treatment
 
  • Investors may defer paying taxes on any capital gains if those gains are invested in Qualified Opportunity Funds for up to nine years. Such gain must be recognized on the earlier of (i) December 31, 2026 or (ii) the date the investment in the Qualified Opportunity Fund is sold or exchanged.
  • Investors shall receive a step-up in basis for capital gains invested in a Qualified Opportunity Fund within 180 days of the transaction. For investments held for at least five years, the taxpayer’s basis is increased by 10 percent of the original gain. For investments held for at least seven years, the taxpayer’s basis is increased by an additional five percent of the original gain. Importantly, to take advantage of the additional step-up in basis after seven years, capital gains must be invested by December 31, 2019.
  • Gain on Qualified Opportunity Fund investments (other than the deferred capital gains discussed above) held for at least 10 years will not be subject to federal income tax.

Program Requirements
 
  • Qualified Opportunity Funds must invest at least 90% of their resources in certain business property or in stock or a capital or profits interest in a "Qualified Opportunity Zone Business."
  • Any business property or stock or partnership interest must be acquired solely for cash from an unaffiliated party. Stock or partnership interests must be purchased at its original issuance, and the original use of the business property must occur with Qualified Opportunity Fund's investment or must be substantially improved by the Qualified Opportunity Fund's investment within 30 months.
  • A Qualified Opportunity Zone Business must be located in a Qualified Opportunity Zone and derive at least 50% of its income from its active conduct. Certain businesses such as golf courses, massage parlors, hot tub or suntan facilities, gambling facilities and liquor stores do not qualify.

If you would like to discuss further how Ice Miller can help you on an Opportunity Zone transaction, please contact the Ice Miller Opportunity Zone team.
 
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