Economic Opportunity Zones (EOZ) are a new economic development tool established by Congress in correspondence with the Tax Cut and Jobs Act of 2017 to influence long-term investments in urban and low-income communities nationwide. EOZ’s are designed to stimulate economic growth as well as create more jobs for distressed communities.
Some notable EOZ benefits:
Opportunity Funds will allow U.S. investors that hold unrealized gains in stocks and mutual funds to merge their resources into projects located in these zones, which will be helpful in rebuilding low-income communities.
The investors will qualify for a temporary tax deferral for the capital gains they invest in an Opportunity Fund, be a step-up in basis for capital gains that are reinvested in Opportunity Funds, and have a permanent exclusion from taxable income of capital gains from a sale or an exchange of an investment in a certified opportunity zone fund if they hold the investment for 10 years
You don’t need to live or have a business in an Opportunity Zone to get the tax benefit as long as you invest into a recognized gain into a fund and defer tax on that gain.
In order to be a Qualified Opportunity Fund, a corporation and/or partnership can self-certify by filing Form 8996 along with their federal tax return.
You are able to defer your taxes for the previous year by filing an amended tax return with Form 1040X along with Form 8949
A list of Qualified Opportunity Zones can be found here https://www.irs.gov/pub/irs-drop/n-18-48.pdf
The tax benefits associated with Economic Opportunity Zones present excellent opportunities for individuals with interests in investing to receive preferential tax treatment. If you are wondering whether or not an EOZ may benefit you, your accountant will be able to assist you in the decision making process.