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INVESTOR SUPPORT
Opportunity Zones are designed to provide potentially significant tax benefits to investors who re-invest capital gains into long-term investments into communities designated for economic development. They offer investors the ability to positively impact communities struggling to attract capital to generate sustainable economic opportunity for their community, while simultaneously deferring capital gains tax on realized gains if the gains are invested in a Qualified Opportunity Fund within 180 days of the sale.
WHAT ARE OPPORTUNITY ZONES?
An Opportunity Zone is a powerful new tool intended to stimulate investment in distressed communities. Harnessing this tool to support short- and long-term community objectives requires careful and thoughtful planning. Leafwise provides a roadmap to help communities, investors, businesses, developers, CDFI’s, and nonprofits plan for potential investments in Opportunity Zones by understanding local needs, aligning community assets, establishing regulatory tools and financing incentives to support investments and forming partnerships toward equitable and inclusive community development.
More than 8,700 census tracts were designated as Opportunity Zones across all 50 states, the District of Columbia and five U.S. territories. For communities with increasing housing insecurity and growing economic inequality, an Opportunity Zone designation provides a chance to shape strategies and policies that harness this powerful incentive, while serving the needs of current and future residents and communities.
WHY OPPORTUNITY FUNDS?
Qualified Opportunity Funds are a new private investment vehicle authorized to aggregate and deploy capital into Opportunity Zones. Qualified Opportunity Funds will facilitate “impact investments” for investors and for the community, and tax benefits derived from these investments will encourage investment in Opportunity Zones. U.S. investors are eligible to receive certain tax benefits on realized capital gains that are reinvested in Opportunity Zones through Qualified Opportunity Funds.
Key benefits of a Qualified Opportunity Zone Fund (QOZF):
- Temporary deferral of taxes on previously earned capital gains. Investors can defer tax on any prior Capital Gains deposited into a Qualified Opportunity Zone Fund (QOF) for up to 5 years.
- Basis step-up of previously earned capital gains invested. After 5 years investors will only be required to pay taxes on 90% of the original amount deposited, which will be assessed at the current capital gains tax rate versus far higher future capital gains tax rates.
- Permanent exclusion of taxable income on new gains. After a required ten-year minimum term, the initial amount deposited plus all of the accrued interest derived from QOF property (real estate and business stock) can be withdrawn 100% tax free.