KOZONE

1. What is an Opportunity Zone?
An Opportunity Zone is a federally designated census tract identified as economically distressed, where investments are encouraged through tax incentives aimed at driving long-term economic development and job creation.

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2. What is a Qualified Opportunity Fund (QOF)?
A Qualified Opportunity Fund is an investment vehicle (typically a partnership or corporation) formed to invest at least 90% of its assets in Opportunity Zone property or businesses.

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3. Who can invest in a QOF?
Any taxpayer with eligible capital gains—individuals, corporations, partnerships, trusts, or estates—can invest those gains into a QOF.

 

4. What types of gains are eligible?
Short-term or long-term capital gains from the sale of property, stocks, businesses, or other investments are eligible, as long as they are not from transactions with related parties.

 

5. How long do investors have to invest their gains?
Generally, investors must reinvest eligible capital gains into a QOF within 180 days of realizing the gain, though special timing rules apply to partnerships and pass-through entities.

 

6. What are the current tax benefits under the new legislation?
Investors can still defer tax on reinvested capital gains and, if the QOF investment is held for at least 10 years, eliminate federal capital gains tax on the appreciation of the Opportunity Zone investment itself.

 

7. Are basis step-ups still available?
No. The former 5-year and 7-year basis step-ups that reduced the original deferred gain are no longer available for new investments under current law.

 

8. Is there still a deadline to invest in Opportunity Zones?
No. The program has been made permanent, eliminating the prior 2026 sunset and allowing ongoing investment under the revised framework.

 

9. When does the deferred capital gain become taxable?
Under the new structure, deferred gains are recognized based on updated statutory rules rather than a single universal date, such as the former December 31, 2026 deadline.

 

10. What types of projects qualify for Opportunity Zone investment?
Qualified projects include ground-up real estate development, substantial rehabilitation of existing property, and operating businesses that materially operate within an Opportunity Zone.

 

11. Can Opportunity Zone investments be combined with other incentives?
Yes. Opportunity Zone investments are commonly layered with tools like TIF, historic tax credits, LIHTC, NMTC, and HUD financing to improve project feasibility and investor returns.

 

12. Are there reporting or compliance requirements?
Yes. QOFs must meet annual asset tests, follow substantial improvement rules, and comply with expanded reporting and transparency requirements introduced under the new legislation.

 

13. Is Opportunity Zone investing suitable for short-term projects?
No. The primary benefit—tax-free appreciation—requires a long-term hold, making OZ investing best suited for patient capital and long-term development strategies.