Opportunity Zone Magazine Volume 1, Issue 3 | Page 48
48 OPPORTUNITY ZONE MAGAZINE | VOLUME 1 • ISSUE 3
EB-5 AND OPPORTUNITY ZONE OFFERINGS — A SYNERGISTIC APPROACH
the EB-5 program, the benefits to be received involve
tax and centers for deferral and/or elimination of
capital gains taxation if certain standards are met.
3. Both programs involve the geographic limitations that
are similar in nature. For purposes of example, in the
EB-5 program, there is a significant incentive to have
a project located either in a rural area or in an area
that qualifies as a targeted employment area (TEA)
in order to receive the lower level of investment.
This lower level is currently $500,000 and is slated
to increase to $900,000. Likewise, the OZ program is
based upon the project being located in a designated
OZ area, the classification of which is somewhat
similar to the TEA under the EB-5 program.
Both programs are highly
regulated by different agencies of
the federal government in order
to receive the intended benefits.
THE MAIN DIFFERENCES BETWEEN THE TWO PROGRAMS
INCLUDE THE FOLLOWING:
1. The EB-5 program is only directed towards foreign
investors and not domestic investors. The OZ program
is directed primarily to domestic investors seeking to
shelter and/or defer current and future capital gains.
2. The EB-5 program is based upon both job creation
and maintaining the investment “at risk”, which
components include both expenditures towards
development as well as job creation based upon
operations. The OZ incentive does not involve a
job creation component as a primary purpose but
is more oriented towards an expenditure model in
order to meet the substantial improvement standards,
although as a result thereof, the capital expenditures
will create additional jobs, especially if local or state
governments provide additional incentives.
3. The EB-5 program has a set dollar amount of
investment. Currently this is $900,000 for a TEA
designated project and $1,8 million for non-TEA
areas. The OZ program does not have any minimum
or maximum investment amount for participating
investors.
4. The timing of the offerings is very different. EB-5
offering documentation requires far more due diligence
and information, including a required economic report
4. Both programs are highly regulated by different
agencies of the federal government in order to receive
the intended benefits.
5. Each program has specific performance standards
that need to be adhere to over and above the overall
economics of the specific project that generate an
economically viable transaction. Accordingly, both
programs involve the satisfaction of specific either
job or expenditure requirements in order to satisfy the
rules and regulations of the specific program.
6. Both programs primarily involved in real estate
development opportunities that either create jobs
and/or require a certain amount of expenditures
in order to meet the regulatory requirements of
the specific program. Likewise, both programs
allow for the development of businesses within the
applicable areas and/or zones in question, although
it is anticipated that just like the EB-5 program, the
primary deployment of OZ capital will be for the
benefit of developing real estate projects.
7. At the end of the day, it is apparent that the main
beneficiaries in addition to the investors of the two
programs or real estate developers are neighborhoods
who will receive affordable and targeted capital to
encourage the development of real estate projects
and/or businesses in particular areas, which generally
have a more impoverished and higher unemployment
rates compared to the national average.
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