Unpacking The Complex Opportunity Zone Tax Program

This post originally appeared on the Louisiana Technology Park blog.

Established through the tax reform law of 2017, federal Opportunity Zones are a new development program designed to drive long-term private investments to low-income communities.

The law allowed governors in each state to designate low-income census tracts as Opportunity Zones that offer federal tax incentives for certain types of investments within those designated areas. In Louisiana, Gov. John Bel Edwards designated 150 tracts as Opportunity Zones, including several in the Baton Rouge region.

The new tax law provides investors an opportunity to defer and partially eliminate tax on capital gains income that is reinvested in an Opportunity Zone, while completely eliminating taxes on the appreciation of the investment.

Attorney and tax-law specialist Dan Walter of law firm Stone Pigman Walther Wittmann gave an overview of the new Opportunity Zone Program and the laws and regulations that govern it at a recent Tech Park Academy event at the Louisiana Technology Park. Read on for a look at what he shared.

Structure and Timing

The Opportunity Zone Program offers multiple tax benefits to qualified investors. First, investors can defer tax on any prior gains invested in a Qualified Opportunity Fund (QOF) until 2026 or until the investment is sold. Second, if the investor holds the investment in the Opportunity Fund for at least 10 years, the investor can forgive taxes on the appreciation of the investment.

A Qualified Opportunity Fund is an investment vehicle that is set up as either a partnership or corporation for investing in eligible property that is located in an Opportunity Zone.

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