1. Opportunity Zones Introduction
Benefits of the Opportunity Zones Tax Incentives
Qualified Opportunity Zones – Qualification and Status
Qualified Opportunity Funds – What are the rules, how do you qualify?
Direct and indirect investment in Qualified Opportunity Zone Business Property
Qualified Opportunity Zone Business Property
MJN
September 5, 2018

2. for making timely investments in
Taxpayers can get
capital gains
tax deferral
(& more)
for making timely investments in
Qualified Opportunity Funds (QOFs)
which invest in
MJN
Qualified Opportunity Zone Property
September 5, 2018

3. 3 Tax Incentive Benefits1. 2. 3.
Gain Deferral
Partial forgiveness
Forgiveness of additional gains
JSS
September 5, 2018

4. Jan. 2, 2018
Taxpayer enters into a sale that generates $1M of capital gain
June 30, 2018
(Within 180 days), Taxpayer contributes entire $1M of capital gain to a Qualified Opportunity Fund
Taxpayer is deemed to have a $0 basis in its QOF investment
QOF Invests the $1MM in Qualified Opportunity Zone Property
JSS
2018
2019
2020
2021
2022
2023
2024
2026
2027
2028
2029
September 5, 2018

5. 2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
Jan. 1, 2018
Taxpayer enters into a sale that generates $1M of capital gain
June 30, 2018
(Within 180 days), Taxpayer contributes entire $1M of capital gain to a Qualified Opportunity Fund
Taxpayer is deemed to have a $0 basis in its QOF investment
QOF Invests the $1MM in Qualified Opportunity Zone Property
June 30, 2023
(After 5 years), Taxpayer’s basis in investment in QOF increases from $0 to $100k
June 30, 2025
(After 7 years), Taxpayer’s basis in investment in QOF increases from $100k to $150k
Dec. 31, 2026
$850K of the 1MM of deferred capital gains are taxed and the basis in QOF investment increases to $1MM.
June 30, 2028
(10 years later), Taxpayer sells investment for $2.0MM. Basis is deemed to be FMV.
Thus, no tax on appreciation
JSS
September 5, 2018

6. Opportunity Zone Incremental Benefit
JSS
23.8% Tax Rate
5 Year
7 Year
12/31/2026
10 Year
Standard After Tax IRR
6.00%
Incremental OZ Benefit
2.08%
1.95%
1.71%
3.08%
OZ Investment IRR
8.08%
7.95%
7.71%
9.08%
Percentage Increase
35%
32%
29%
51%
September 5, 2018

7. JSS
September 5, 2018

8. for making timely investments in
Taxpayers can get
capital gains
tax deferral
(& more)
for making timely investments in
Qualified Opportunity Funds (QOFs)
MJN
September 5, 2018

9. Qualified Opportunity Fund
Statutory Requirements
Purpose
Certification
Assets Test
Noncompliance Penalty
Certification Process JG
September 5, 2018

10. Qualified Opportunity Fund - Purpose
An investment vehicle organized as a corporation or a partnership for the purpose of investing in Qualified Opportunity Zone Property (QOZP). JG
September 5, 2018

11. Certification Process
IRS announces self-certification process for QOFs
Self-certification form to be attached to tax return JG
September 5, 2018

12. Qualified Opportunity Fund – Assets Test
Must hold at least 90% of assets in QOZP, determined by the average of the percentage of QOZP held on:
The last day of the first six month period of the fund’s taxable year, and
The last day of the fund’s taxable year JG
June 30th
December 31st
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEPT
OCT
NOV
DEC
September 5, 2018

13. Qualified Opportunity Fund – Noncompliance Penalty
Failure to meet 90% investment standard
Per month penalty for failing to meet 90% test
% shortfall
x underpayment rate
penalty
No penalty if it is shown failure is due to reasonable cause
(Federal short-term rate plus 3%) – currently 4% JG
September 5, 2018

14. for making timely investments in
Taxpayers can get
capital gains
tax deferral
(& more)
for making timely investments in
Qualified Opportunity Funds (QOFs)
which invest in
MJN
Qualified Opportunity Zone Property
September 5, 2018

15. Qualified Opportunity Zone Property (QOZP)
Qualified Opportunity Zone Stock
Qualified Opportunity Zone Partnership Interest
Qualified Opportunity Zone Business Property JG
September 5, 2018

16. Qualified Opportunity Zone Stock and Partnership Interests
The investment must be acquired after December 31, in exchange for cash;
Must be a qualified opportunity zone business, or is being organized for the purpose of being a qualified opportunity zone business;
Must remain a qualified opportunity zone business for substantially all of the qualified opportunity fund’s holding period JG
September 5, 2018

17. Qualified Opportunity Zone Businesses (QOZB)
A trade or business in which substantially all of the tangible property owned or leased by the taxpayer is qualified opportunity zone business property (QOZBP) and:
Neil
At least 50% of income derived from Active Conduct
Substantial portion of intangible property used in active conduct of business
< 5 percent unadjusted basis of property is nonqualified financial property
September 5, 2018

18. QOZB: Excluded Businesses
Can’t be a “Sin Business”
A private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, racetrack or other facility used for gambling, or any store the principal business of which is the sale of alcoholic beverages for consumption off premises. 
NEIL
September 5, 2018

19. Qualified Opportunity Zone Business Property (QOZBP)
Tangible property used in a trade or business
Acquired by purchase from an unrelated party (20% standard) after December 31, 2017
During substantially all of holding period, substantially all the use is in a QOZ
Original use in the QOZ commences with the taxpayer OR
Taxpayer substantially improves the property
during any 30-month period after acquisition, additions to basis exceed an amount equal to the adjusted basis of such property at the beginning of such period
JSS
September 5, 2018

20. Qualified Opportunity Zones
CDFI Fund Opportunity Zones Mapping Tool: NF
September 5, 2018

21. Questions?
September 5, 2018

22. Non-Traditional Alternative Financing Sources: Soft Funds, Opportunity Zone Funds
Thomas J. Fantin
Glenn A. Graff
Novogradac & Company LLP
Applegate, Thorne Thompson
James Peck
Roy Williams
Wells Fargo Multifamily Capital
Tiber Hudson LLC
September 5, 2018