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Opportunity Zone Funds: Could Changes Be on the Horizon?

Post on: June 28, 2022 | John Rickman | 0

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A key incentive of the federal opportunity zone program may have expired, but qualified opportunity zone funds continue to offer considerable long-term tax advantages for investing in private capital. In addition, legislative changes to opportunity zones currently under consideration in Congress may end up restoring the program’s 10-15% basis point boosts that expired at the end of last year.

 

What’s Next for Opportunity Zone Funds?

Opportunity zone funds reinvest unrealized capital gains into long-term projects in low-income communities, typically real estate located in a qualified opportunity zone (QOZ). There are more than 8,700 census tracts in U.S. urban, suburban, and rural areas that America’s governors and mayors have designated as economically distressed QOZs.

Current law allows QOZ investors to defer paying taxes on their investments until 2026. If a QOZ investment is held for 10 years, any appreciation on the investment essentially becomes tax-free.

Certain expired provisions of the law allowed QOZ investors to enjoy a 10% reduction in initially deferred capital gains. However, proposed updates to opportunity zones would:

  • Extend the federal program and its related deferrals for another two years (2028 and 2023, respectively)
  • Allow qualified opportunity zone funds to invest in other qualified opportunity zone funds

Notably, the bicameral, bi-partisan proposal would also increase the program’s reporting requirements to promote more equitable distribution of QOZ investments and sunset tracts no longer determined to be in distress.

Even if proposed updates to the opportunity zone program fail to proceed, QOZ funds remain a beneficial tax-advantaged option for long-term investing in private capital, while creating jobs and improving economic outcomes for people living in economically distressed communities.

Want to learn more about opportunity zone funds and other alternative investments available on Altigo? Download our complimentary e-guide or contact us.

 

 

Disclaimer: Altigo provides this information for educational purposes only. It should not be construed or relied upon as legal or tax advice.

About author

John Rickman

John is a writer and editor with more than 20 years of experience creating engaging content for diverse industry audiences. In previous roles at Bixal and Booz Allen Hamilton, he consulted with federal agencies on plain language and web writing. In his free time, John likes to promote and attend live music concerts in his hometown of Richmond, VA. John holds a bachelor’s degree in Religion from American University.
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