Opportunity zones are the hottest new investment opportunity in America. Now it seems as if everyone with capital gains to shield is trying to invest in them.
Established by the 2017 Tax Cuts and Jobs Act in an effort to incentivize investment in economically struggling areas throughout the United States, opportunity zones offer investors access to significant tax benefits, including the ability to defer their capital gains from taxable income through reinvestment. More critically, investments in opportunity zones that are held for at least ten years are exempt from income tax.
The Puget Sound Business Journal recently held a Thought Leader Forum on the topic of Opportunity Zones and the benefits they can provide to investors in our region. The Thought Leader panel was composed of Jeff Feinstein, Partner, Pinnacle Partners; Rod Fujita, CPA and principal, tax practice director of real estate services for Bader Martin, PS; Joe McCarthy, Partner, Stoel Rives; and Eugenie Rivers, counsel, Cairncross & Hempelmann. Emily Parkhurst, Market President and Publisher for the Puget Sound Business Journal, led the discussion.
Parkhurst: Let’s start out by outlining how this program works, and what people need to know before they jump in. Who wants to start off?
Fujita: The Opportunity Zones (OZ) program was created by the Tax Cuts and Jobs Act of 2017 (TCJA), which was designed to spur economic development and job creation in distressed communities by providing tax benefits to investors. Investors must adhere to various requirements put in place by the statute and proposed regulations, including who is eligible to benefit from the OZ tax incentives, what gains are eligible for deferral, when investments in Qualified Opportunity Funds (QOF) must be made, timeline of the tax benefits, operational requirements of the fund, and exit strategies.