Qualified Opportunity Zones are areas designated by the US Department of the Treasury that are economically distressed and may be eligible for preferential tax treatment. There are 8,762 zones in all and they were created as part of the Tax Cuts and Jobs Act of Decmeber 2017. The purpose of the zones is to spur economic development and job creation in distressed communities.
A shape file containing the zones was made available on Community Development Financial Institutions Fund website and the details are presented below.
Investors can defer tax on any prior gains invested in a Qualified Opportunity Fund (QOF) until the earlier of the date on which the investment in a QOF is sold or exchanged, or December 31, 2026.
If the QOF investment is held for longer than 5 years, there is a 10% exclusion of the deferred gain. If held for more than 7 years, the 10% becomes 15%. If the investor holds the investment in the Opportunity Fund for at least ten years, the investor is eligible for an increase in basis of the QOF investment equal to its fair market value on the date that the QOF investment is sold or exchanged.
Real Estate investments will be an eligible asset and at this time it appears as though all types of real estate will be eligible - residential, commercial, industrial, multifamily.
The Opportunity Zones go beyond the 50 states as there are almost as many zones in Puerto Rico (861) as there are in California (879). Almost the entire island of Puerto Rico was included in the Opportunity Zones. There are also 14 Zones in St. Thomas and St. Croix in the US Virgin Islands.
For completeness we will mention that there are 45 zones across Guam, Rota, Tinian and Saipan in the Pacific.
Disclaimer - This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.