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. OPPORTUNITYZONE.COM