What is an Opportunity Zone?
Opportunity Zones are a new community development program established by Congress in the Tax Cuts and Jobs Act of 2017. This new federal capital gains tax incentive program is designed to drive long-term investments to low-income communities. The new law provides a federal tax incentive for investors to re-invest their capital gains into Opportunity Funds, which are specialized vehicles dedicated to investing in designated low-income areas.
Where are Louisiana’s Opportunity Zones?
Take a look at the map here!
What is an Opportunity Fund?
A qualified Opportunity Fund is any investment vehicle organized as a corporation or partnership with the specific purpose of investing in Opportunity Zone assets. The private sector is responsible for establishing Opportunity Funds. To become a qualified Opportunity Fund, an eligible taxpayer self-certifies by completing a form (Form 8996) and submitting the form with the taxpayer’s federal income tax return for the taxable year. Opportunity Funds must hold at least 90 percent of their assets in qualifying Opportunity Zone Property, and will be tested at the 6-month and year-end points to ensure compliance. Guidelines to set up an Opportunity Fund or other Opportunity Zone FAQs can be found here.
What types of projects qualify for an Opportunity Fund investment?
The policy enables funds to be responsive to the needs of different communities, allowing for investment in operating businesses, equipment, and real property. For example, funds can make equity investments in new or expanding businesses by purchasing original-issue stock of the company if substantially all of the company’s tangible property is and remains located in an Opportunity Zone. Funds can take original interests in partnerships that meet the same criteria. Funds can also invest directly in qualifying property, such as real estate or infrastructure, if the property is used in the active conduct of a business, and if either the original use of the property commences with the fund or the fund substantially improves the property by investing at least as much as the investor’s basis in refurbishments.