Opportunity Zones

Update – Today, April 17, 2019, the IRS announced the issuance of additional guidance relating to investments in Opportunity Zones. Their 169-page release is still being digested, but some key initial takeaways include the following:

1. Three safe-harbors as well as a facts and circumstances test to provide increased clarity for compliance with the 50 percent gross income test for operating businesses
2. Rules providing for a reasonable period of time for a Qualified Opportunity Fund to reinvest the return of capital into qualifying stock, partnership interest or property
3. Clarity regarding how taxpayers can structure investments to comply with the requirements of the Opportunity Zone incentive

For more information on Opportunity Zones, or to see how the new guidance impacts you or your business, please contact Bill Lorimer or Mark Underhill.

Update – On Friday, October 19, 2018, the IRS issued the first round of long-awaited guidance on investments in Opportunity Zones. The proposed regulations and related revenue ruling aim to bring clarity to many questions investors have been asking. The Treasury Department said additional guidance will be released before the end of the year, but according to one Treasury official they “felt it was important to issue the core guidance now that’s needed to get the funds up and operating and not wait until we have every question answered.”

Some highlights of the proposed regulations include: 

• Clarification of gains eligible for deferral
• List of eligible taxpayers including individuals, corporations and pass-through entities
• Clarification that qualified investments only include equity interests in a qualified Opportunity Fund
• Rules outlining substantial improvement requirements for land and buildings
• Release of Form 8949 in draft to elect deferral under the Opportunity Zone program

To find out more information please contact us at opportunityzones@bmss.com.

The Opportunity Zone program provides major tax incentives to foster investment and growth in over 8,700 federally designated areas across the country. This program allows taxpayers to re-invest capital gains into Opportunity Funds that subsequently invest in businesses and property in these low-income rural and urban areas. This program has specific requirements to ensure compliance, and BMSS has the experience and knowledge to help you navigate them.

We Are Prepared to Assist You With:

• Advising on Fund formation, structure and requirements
• Fund compliance, including testing, reporting and certification
• Audit, attest and tax services
• Analysis of gain deferral and exclusion
• Investor education and reporting

Program Incentives Include:

• Deferral of original capital gains
• Up to 15% exclusion from tax on original deferred gain
• Permanent exclusion of future appreciation for investments held 10 years