A new community investment tool designed to drive long-term capital to eligible low-income urban communities throughout the nation.
QOZs were designed to encourage patient, long-term investments in certain low-income urban and rural communities throughout the U.S.by providing a powerful new tax incentive for investors with capital gains in the stock market, real estate, and other assets to reinvest those dollars into real estate and businesses located in QOZs through special private investment vehicles meeting the requirements of the TCJA called Qualified Opportunity Zone Funds (“QOFs”).
Opportunity Zones are low-income census tracts nominated by governors and certified by the U.S. Department of the Treasury into which investors can now put capital to work financing new projects and enterprises in exchange for certain federal capital gains tax advantages. The country now has over 8,700 Opportunity Zones in every state and territory that will last over a decade through the end of 2028. Per the Economic Innovation Group, QOZs have an average poverty rate of nearly 31%, an average median family income of only 59% of its area median, contain 1.6 million places of business, 24 million jobs, 35 million Americans, and represent nearly 18% of total U.S. land area. According to the Urban Institute, less than 4% of QOZs are at high risk of rapid socioeconomic change, displacement, or gentrification.
Opportunity Zones offer investors the following incentives for putting their capital gains to work in low-income communities:
A temporary tax deferral for capital gains reinvested in an Opportunity Fund. The deferred gain must be recognized on the earlier of the date on which the opportunity zone investment is sold or December 31, 2026.
A step-up in basis for capital gains reinvested in an Opportunity Fund. The basis of the original investment is increased by 10% if the investment in the qualified opportunity zone fund is held by the taxpayer for at least 5 years, and by an additional 5% if held for at least 7 years, excluding up to 15% of the original gain from taxation.
A permanent exclusion from taxable income of capital gains from the sale or exchange of an investment in a qualified opportunity zone fund, if the investment is held for at least 10 years. (Note: this exclusion applies to the gains accrued from an investment in an Opportunity Fund, not the original gains).
HOW OPPORTUNITY ZONES WORK
Investors can now choose to roll capital gains into qualified Opportunity Funds, which in turn channel patient capital into qualifying equity investments in Opportunity Zones for at least a decade in exchange for capital gains tax reductions and possible exemptions. This new source of capital will seed new startups, accelerate business expansion, create jobs, increase and improve housing options, and revitalize the built environment in distressed communities across the country.
Here’s what we know about where these communities stand today.
Source: 2015-2019 American Community Survey 5-year estimates
A Qualified Opportunity Fund is a private sector investment vehicle, set up as either a partnership or corporation, for investing at least 90 percent of their capital in qualifying assets within an Opportunity Zone. It utilizes investor’s gains from a prior investment for funding the Opportunity Fund.
This tool displays designated qualified Opportunity Zones as published by the CDFI Fund as of June 15, 2018. Opportunity Zones can be seen by searching for an address or zooming in on an area in the map. More information about designated census tracts can be viewed by clicking on the area.
The information, maps, and external links contained in this website, including all information relating to Opportunity Zones, among others, is presented for informational purposes only. The information is provided by APPA as a courtesy and while we endeavor to keep the information as current and correct as possible, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, related graphics, or links contained on the website for any purpose. Any reliance you place on such information is therefore strictly at your own risk. In no event will APPA or any of its employees, owners, agents, members, managers, or be liable for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising from loss of data or profits arising out of, or in connection with, the use of this website. Through this website you are able to link to other websites which are not under the control of APPA. We have no control over the nature, content and availability of those sites. The inclusion of any links does not necessarily imply a recommendation or endorsement of the views or information expressed therein. Every effort is made to keep this website available at all times. However, APPA takes no responsibility for, and will not be liable for, the website being temporarily unavailable due to technical issues beyond our control.