By Scott D. Shimick
As part of the 2017 Tax Cuts and Jobs Act, Congress added Sections 1400Z-1 and 1400Z-2 to the Internal Revenue Code, creating the Qualified Opportunity Zone tax benefits. Owing in part to confusion over the provisions, the Qualified Opportunity Zone tax benefits have not been as widely publicized and discussed as most of the other provisions of the TCJA.
However, the IRS has recently issued proposed regulations and a Revenue Ruling that have brought clarity and interest to the Qualified Opportunity Zones.
Qualified opportunity zone benefits.
Congress’s purpose in creating the Qualified Opportunity Zone tax incentives was to promote private sector investment in economically distressed communities. Investors in the opportunity zones are eligible for the deferral of capital gains and possible reductions in total tax liability.
Investors in a Qualified Opportunity Zone Fund (QOZ Fund) can defer an unlimited amount of their capital gains. This deferral allows the investor to push back the recognition of capital gains to the earlier of (1) Dec. 31, 2026 and (2) the sale or exchange of the QOZ Fund investment.