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Opportunity Zone Program
The Opportunity Zone Program is an economic development tool created by the Tax Cuts and Jobs Act of 2017. The program encourages long-term investment in designated census tracts by providing a tax incentive to investors who move unrealized capital gains into projects located within these zones. The program allows capital gains taxes to be deferred and reduced for investments held for a minimum of 5 years. Additional benefits are available to those holding their investments for 7 or 10 years. The program is intended to bring new private investment into qualified zones and encourage business creation within the zones.
This program is new and the rulemaking process is being conducted by the U.S. Department of Treasury. In broad terms, the program incentivizes investors to make investments in real estate or businesses inside the zone in return for periods of 5, 7, or 10 years. The tax benefits are more advantageous the longer the investment is held. For investors holding the investment up to 10 years, the program allows for the investment to be sold free of capital gains tax and receive a reduction on the untaxed capital gains that were originally rolled into the Opportunity Zone.
Opportunity Funds are the financial vehicle that organize and deploy the private capital into Opportunity Zones. These funds must invest a minimum of 90% of their capital in Opportunity Zones. Qualifying investments include tangible business property that is used to improve the property located within an Opportunity Zone, stock in a domestic corporation located within an Opportunity Zone, or partnership interest in a business located within an Opportunity Zone.
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