After several months of discussion, The Department of Treasury released new regulations and clarifications about the Opportunity Zone program that can benefit business owners, investors and developers who put money into a “qualified opportunity fund”.
Most of our family offices, FON Search and The Quest Organization, feel that the new guidelines will cause more real estate investors and developers to more aggressively start to invest in the opportunity zones. There is still a number of issues that we don’t have answers for yet, however another release of regulations which should clarify many of the unclear issues should be out before December 31, 2018.
Some of the important issues that were clarified in the recent release were:
-Regarding starting an opportunity fund, any taxpayer whether it is a corporation or a partnership can self-certify as a Qualified Opportunity Fund, as long as the entity is statutorily eligible to do so. The fund can consist of 2-3 people, and it can be set up as an LLC, however they must purchase property in designated opportunity zones and they must invest in renovating the property.
-The initial regulation had required that the investor had to put the same value of improvements into the property as the amount that they paid for the property, however under the new regulation, the investor has to double the basis of the building and not the land.
-One other key issue was the expiration date for the opportunity zones. Initially the incentives were supposed to expire in 2028, however they clarified in the new regulation that investors can hold an interest in the opportunity fund until 2047.
If you have any additional questions about establishing an opportunity fund or investing in opportunity zones, please feel free to contact Michael Rosenblatt, President of FON Search and The Quest Organization at 212-971-0033 or via email at michael.rosenblatt@questorg.com
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