Investors have a new tool to develop certain areas where poverty and unemployment drag the community down. This tool is called Opportunity Zones (OZ).
Opportunity zones are designations that bring investors, state and federal governments together to benefit certain areas overlooked by investments thanks to a legislation created in 2018 called Tax Cuts and Jobs Act.
The Internal Revenue Service (IRS) defines OZ as economically distressed communities where new investments may be eligible for preferential tax treatment. These areas are designated by states governments and the nomination is certified by the Secretary of the Treasury.
Earlier this year, the United States Department of the Treasury (USDT) approved 8700 economically-diverse Zones covering 12 percent of all census tracts in the US.
It is a new vehicle created by the federal government with a rare bi-partisan support.
Individual, corporations or partnerships (most LLCs are characterized as partnerships) can participate if they fulfill the requirements. These investors can later shield taxable gains from taxes for 5, 7 or 10 years, while also getting a discount or break. In addition, a 10 year holding period will make any upside gains from the investment tax-free.
The investments need to be tangible assets. This makes it ideal for manufacturing or asset-heavy businesses, including real estate, factory building, and others requiring big investments.
Legal counsel is very important to understand all the caveats of the new law and to encourage diverse investors to enter into these agreements with qualified entities.
If you are interested in learning more about these Opportunity Zones and how your business can invest in projects, make an appointment with attorney Marcos E. Garciaacosta, Esq. at (480) 324-6378 or e-mail us at [email protected]