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Opportunity Zones

Opportunity Zones: A New Investment Opportunity

Community Revitalization by Rewarding Private Investment

Are you interested in reviving hard-hit areas in your community? Could you use a tax benefit, too? The newly created Opportunity Zones program, enacted as part of the Tax Cuts and Jobs Act of 2017, provides an opportunity to do both.

The Opportunity Zones program, found in Sections 1400Z-1 and 1400Z-2 of the Internal Revenue Code (“IRC”), is intended to spur investment in low-income or economically disadvantaged areas.

The tax incentives provide investors with an opportunity to defer recognition of gains on sales of assets, permanently reduce a portion of the deferred gain to be recognized and permanently exempt any future gain with respect to reinvested proceeds. This occurs by reinvesting the gain in a Qualified Opportunity Fund (“QOF”), an investment vehicle specifically focused on making investments in Qualified Opportunity Zone (“QOZ”) businesses and/or property, allowing for greater diversification than other tax deferral mechanisms.

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Opportunity Zone Services

Cherry Bekaert has an established Opportunity Zones team with expert technical knowledge of key tax, accounting, transaction structuring and compliance issues. Our Opportunity Zone services provide you the tools you need to make the right investment decision.

Cherry Bekaert is uniquely positioned to help Funds and project sponsors take advantage of the opportunity zones program by providing:

  • Fund organization and structuring for qualification under the rules
  • Investment planning for qualified assets or trades or business of the Fund
  • Asset testing and compliance for Qualified Opportunity Funds
  • Income and asset testing and compliance for Qualified Opportunity Zone Businesses

As in individual investor, Cherry Bekaert can provide guidance in the investment fundamentals and assist with the following:

  • Review of private placement memorandum or prospectus for funds for information and qualifications under the OZ program
  • Advice and planning for eligible gains to rollover into OZ funds
  • Provide projected tax returns (before and after) and net present value for comparison with other funds/projects
  • Tax modeling to compare investment in OZ versus other deferral techniques such as 1031 exchange or other long-term investments

Tax Incentives Available

  • Temporary deferral for recognition of realized gain
    until as late as December 31, 2026

    • To the extent gain portion of proceeds is reinvested in QOF within
      180 days of the sale or exchange of any asset, gain is not required
      to be recognized in year of sale
    • Gain deferred is recognized upon the earlier of the date the
      investment in QOF is sold, or December 31, 2026
  • Permanent reduction of deferred gain depending on
    how long the investment in QOF is held

    • 10% of original deferred gain if QOF is held at least five years
      before gain is recognized
    • Additional 5% of original deferred gain if QOF is held at least
      seven years before gain is recognized
  • Exemption from realized gain on QOF investment held
    at least 10 years

    • Gain on subsequent appreciation is eligible for perma

 

Contact Our Opportunity Zones Team

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Mark H. Cooter

Partner, Tax Services
Real Estate, Construction & Hospitality Industry Practice Leader

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Catherine L. Bazley

Catherine L. Bazley

Tax Services

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Greg Davis

Greg Davis

Tax Services

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