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Federal — The Investment Opportunity Act, part of the Tax Cuts and Jobs Act, enacted new Secs. 1400Z-1 and 1400Z-2 of the Internal Revenue Code establishing a new federal program providing for investments in economically distressed communities called Qualified Opportunity Zones (QOZs). These investments are made by investment vehicles called Qualified Opportunity Funds (QOFs). A QOF is an entity taxed as a corporation or partnership that has a purpose of investing in eligible property located in a QOZ and that invests at least 90% of its assets in QOZ property. The program is designed to spur economic development by providing tax benefits to investors. Investors can defer tax on capital gains invested in a QOF until the earlier of the date on which the investment in a QOF is sold or exchanged, or December 31, 2026. Additional benefits are provided the longer the QOF investment is held. On October 19 the Treasury Department and the Internal Revenue Service issued proposed regulations and guidance on the new Opportunity Zone program which can be viewed here.
Over the next few months, the Treasury Department and the Internal Revenue Service will be providing further details, including additional legal guidance, on this new program. At that time, we will provide more detailed information.