Opportunity Zone Magazine Opportunity Zone Magazine Volume 1, Issue 1 | Page 8
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OPPORTUNITY ZONE MAGAZINE | VOLUME 1
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ISSUE 1
Get in the Zone:
A Primer on Forming
Qualified Opportunity Funds
By Debbie A. Klis
A practical guide to structuring a Qualified Oopportunity Fund and best practices
to maintain the fund’s compliance throughout the investment period.
T
he Tax Cuts and Jobs Act of 2017 (TCJA) made
substantial changes to many aspects of the Internal
Revenue Code (IRC) including the creation of a
program deemed by many to be the most transformative
development in real estate and venture capital in many
years. It encourages investment in economically distressed
communities known as “Qualified Opportunity Zones”
(QOZs) in all 50 states. The QOZ program grants favorable
tax treatment for an unlimited number of investments in
QOZs during the life of the program, unlike certain federal
tax credits, which are available on a finite basis annually.
The singular goal of the program is to tap into trillions
of dollars of unrealized capital gains to spur economic
development and job creation in low-income communities
designated as QOZs by the Treasury Department. The TCJA
requires that QOZ investments occur through Qualified
Opportunity Funds (QOF) rather than directly in a business
or asset within a QOZ.
STRUCTURING A QUALIFIED OPPORTUNITY FUND
A QOF is an entity taxed as a partnership or corporation
(including a n LLC that is ta xed as a par tnership or
corporation) that is organized to facilitate investments in
QOZs on a tax-advantaged basis that will deploy at least 90
percent of its capital into qualifying investments in a QOZ.
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