“Qualified Opportunity Funds: Tax Strategies and Opportunities for Real Estate and Other Investors”
The 2017 Tax Cuts and Jobs Act created a new incentive for investment in qualified low-income communities known as qualified opportunity zones (“QOZs”). The process of opportunity zone designation and IRS approval occurred in early 2018, and the Treasury Secretary has now certified the final list of QOZs. The new Tax Code provisions, under Sections 1400z-1 and 1400z-2 of the Internal Revenue Code, are designed to promote long-term growth in economically distressed areas by providing special tax benefits to taxpayers that would otherwise recognize taxable gain from a sale or exchange, provided that the amount of such gain is reinvested into special entities known as Qualified Opportunity Funds (“QO Funds”).
This Stroock Special Bulletin provides an overview of the QOZ provisions and tax strategies pertaining to such provisions, with a principal focus on opportunities and caveats for real estate developers.