The Treasury and the IRS have designated Opportunity Zones in 15 states and three territories. Private investments in these specific Qualified Opportunity Zones get preferential tax treatment under the Tax Cuts and Jobs Act (TCJA) of 2017 ( P.L. 115-97).
Under the TCJA, the states, territories and possessions nominate low-income communities to be designated as Qualified Opportunity Zones (QOZs), which would be eligible for special tax benefits. The states, territories and possessions were required to nominate zones by March 21, 2018, or request a 30-day extension. The Treasury then had 30 days to designate the nominated zone. QOZs retain their designation for 10 years.
Qualified Opportunity Zone Tax Benefits
Investors in QOZs can defer tax on any prior gains until no later than December 31, 2026, as long as the gain is invested in a Qualified Opportunity Fund (QOF). A QOF is an investment vehicle organized to make investments in QOZs. In addition, after holding the QOF investment for at least 10 years, the investor’s basis increases to the fair market value of the investment on the date it is sold.
The IRS has approved nominations for: Arizona, California, Colorado, Georgia, Idaho, Kentucky, Michigan, Mississippi, Nebraska, New Jersey, Oklahoma, South Carolina, South Dakota, Vermont and Wisconsin. Nominations also were approved for communities in American Samoa, Puerto Rico, and the U.S. Virgin Islands. The Treasury and the IRS also planned to issue additional information on QOFs.
For the list of approved opportunity zones, see the Opportunity Zones Resources webpage at https://www.cdfifund.gov/Pages/Opportunity-Zones.aspx.