Opportunity Zone Taxes

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Opportunity Zones

The Opportunity Zones program offers tax incentives to investors, allowing for the use of realized capital gains to reinvest those dollars in underserved communities across the U.S. The events of the last few years, along with updated guidance, have led to renewed interest in the benefits offered by this program.

At the program’s inception, the tax incentives provided 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. Certain aspects of the program expired in December 2021, however, there are still some advantages to keep in mind.

Potential Tax Savings for Capital Gain Investors

The potential tax benefits of the Opportunity Zone program could be tremendous for you!

Tax Deferral

Tax deferral on capital gain invested in QOF to the earlier of the sale or exchange of the investment asset(s) or December 31, 2026.

Exclusions of Investment Appreciation

After holding investments in a QOF for at least ten years, Taxpayers may elect to receive a permanent exclusion of the appreciation of the QOF investment through a full basis step up to the FMV of the QOF investment on the date such investment is sold or exchanged.

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How We Can Help You

We are an established Opportunity Zones team with deep technical knowledge of key tax, accounting, transaction structuring and compliance issues. Our Opportunity Zones services provide you with the tools you need to make the right investment decision, following a seamless process.

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Fund Organization and Structuring for Qualification Under The Rules

Making sure you are structured and set up correctly.

Review Fund Objectives

Review overall objective of QOF and investments intended to be made, identify potential issues and address as necessary with company and legal advisors.

Coordinate With Legal Team

Coordinate with company attorneys on requirements for QOFs and fund partnership structure to address any identified issues.

Review Documents

Review partnership agreement for QOF and provide comments to ensure qualification of funds and interests held by investors and sponsors.

Verify Gain Contributions

Review and ensure contributions to the QOF qualify, i.e., confirm funds are coming from capital gains incurred in the last 180 days (or slightly different timing depending on investor type).

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Investment Planning for Qualified Assets or Trade or Business of the Fund

Help you with your investment planning for Qualified Assets in Opportunity Zones.

Review Assets

Review planning for investment in assets or trade or business to be acquired by QOF or Qualified Opportunity Zone Business (QOZB).

Identify Potential Isses

Identify issues to be addressed in structure of QOZBs, and other investors in the QOZB, including General Partner or other QOFs.

Evaluate Capital Sources

Evaluate other sources of capital to be used in funding the projects or businesses held by QOZB, including New Markets Tax Credits, Historic Tax Credits, State Tax Credits or other equity and financing sources.

Draft Necessary Documents

Review draft operating agreements from attorneys to ensure qualifications for OZ rules related to QOF and QOZB are met.

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Income and Asset Testing and Compliance for Qualified Opportunity Zone Businesses

Make sure you are operating in compliance with the Opportunity Zone program.

Asses and Monitor

Assess and monitor (quarterly preferred but at least semiannually) asset and income compliance testing for QOZB, and address as necessary cures of any issues in the testing, or meeting of safe harbor provisions as allowed under IRS rules.

Prepare Tax Filings

Prepare and file initial tax year return for QOZB including testing data that would then be provided to QOF investors in OZBs on their K-1s for inclusion on Form 8996 filed by such investor QOFs.

Prepare Testing Information

Annually prepare and file tax returns for QOZB and update information in regard to testing information to be provided to QOF investors for their inclusion on Form 8996, and any specific state filings required to comply with any specific OZ rules at the state level.

Identify Transaction Issues

Identify and address transaction matters as they arise during period the QOZB is developing the real estate project or initial start-up of the trade or business held by the QOZB.

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Asset Testing and Compliance for Qualified Opportunity Funds

We make sure your Qualified Opportunity Fund is operating in compliance with the Opportunity Zone program.

Quarterly Reviews

Assess and monitor (quarterly preferred but at least semiannually) asset and compliance testing for QOF and address as necessary cures of any issues in the testing, as allowed under IRS rules.

Tax Preparation

Prepare and file initial tax year return for QOZB including testing data that would then be provided to QOF investors in OZBs on their K-1s for inclusion on Form 8996 filed by such investor QOFs.

Business Tax Preparation

Transaction Matters

Identify and address transaction matters as they arise during period the QOZB is developing the real estate project or initial start-up of the trade or business held by the QOZB.

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Opportunity Zone Tax Filings

We have a entire team of dedicated Tax Professionals & IRS Enrolled Agents to take care of all your Opportunity Zone Tax Filing needs. Done right for you!

Form 8996

Form 8996 is to certify that the corporation or partnership is a qualified opportunity fund (QOF). It is also used to annually report whether the QOF met the investment standard during its tax year.

Form 8997

Form 8997 is to inform the IRS of the QOF investments and deferred gains held at the beginning and end of the current tax year, as well as any capital gains deferred by investing in a QOF and QOF investments disposed of during the current tax year.