Nearly two years since the Opportunity Zone initiative was enacted, along with its ambiguities and uncertainties, the long wait is finally over as the IRS issued the final regulations providing transparency about investments in qualified opportunity zones (QOZ). Investors looking to reap large tax breaks for investing money into low-income areas are now getting more details on what they are permitted to do in a QOZ. As a result, investors will have more flexibility as well as confidence when injecting their capital gains income into new and expanding businesses in economically distressed communities.
According to the IRS the final regulations provide additional guidance on how an entity becomes a QOF or QOZ business, and the requirement that a QOF or QOZ business engage in a trade or business. Specifically, they address the various requirements that must be met to qualify as a QOF, the requirements an entity must meet to qualify as a QOZ business as well as the potential penalties for not meeting the requirements. In addition, the regulations outline how quickly and how much capital investors must invest to get the tax benefits as well as give some flexibility for investors looking to improve brownfield sites and unoccupied properties.
The final regulations came at a critical time for investors as December 31st, 2019 is the last day to invest in a QOZ to reap the full benefits. However, that does not mean that there are no benefits available to qualified investors after the 2019 deadline. There are still benefits that can be reached if the proper opportunities present themselves. If you are having or expecting to realize a large amount of capital gain and would like to understand more or take advantage of this unique opportunity to significantly reduce your tax bill, please contact one of our knowledgeable team members.