Opportunity Zone Magazine Opportunity Zone Magazine Volume 1, Issue 1 | Page 8

6 OPPORTUNITY ZONE MAGAZINE | VOLUME 1 • 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. OPPORTUNITYZONEEXPO.COM