Opportunity zone funds (OZFs) can help the neighborhoods that need it most, while also providing significant tax benefits for investors.
An Opportunity Zone is a designation created by the Tax Cuts and Jobs Act of 2017 allowing for certain investments in lower income areas to have tax advantages. The purpose of this program is to put capital to work that would otherwise be locked up due to the asset holder’s unwillingness to trigger a capital gains tax.
An opportunity zone fund (OZF) is an investment vehicle that provides tax benefits for private capital to help revitalize economically distressed communities. Both operating businesses and real estate are eligible for investment.
A Qualified Opportunity Zone Fund is any investment vehicle which is organized as a corporation or a partnership for the purpose of investing in qualified opportunity zone property (other than another qualified opportunity fund) that holds at least 90 percent of its assets in qualified opportunity zone property.
Many investor types may take advantage of opportunity zone funds:
- Corporations? Also includes partnerships
- Accredited investors? Defined as high net worth individuals, brokers, and trusts
- Nonresident foreign investors? Only on capital gains earned in the U.S.
- Retail investors? Through funds that have lower minimums, though options are more limited
In addition to their wide eligibility, OZFs have a number of potential benefits.