What are Opportunity Zones?
The Opportunity Zone program is a provision within the 2017 tax legislation designed to incentivize investment in low-income/high poverty areas in the United States. It is hoped that these incentives will result in a wave of new construction and business formation creating jobs and spurring economic development in these distressed areas. The opportunity zones themselves are designated census tracts, which were nominated by the governors of every state and certified by the Treasury Department. Investors with capital gains in a particular tax year can invest their gains in Opportunity Zones through 2026, and receive favorable tax treatment as a result.
What is a Qualified Opportunity Fund?
A Qualified Opportunity Fund (QOF) is an investment vehicle, either a partnership or corporation, established for the purpose of investing in qualified Opportunity Zone property. To participate in the Opportunity Zone program, investors cannot buy property in opportunity zones directly. They must invest through a Qualified Opportunity Fund. The QOF is self declared. It can be an existing entity or a newly created entity, and it must meet a 90% asset test - that is 90% of the assets of the fund must qualify as opportunity zone investments.