The Tax Cuts and Jobs Act added a new section to the Internal Revenue Code that permits taxpayers with capital gains to invest in projects located within specified “opportunity zones” (OZ) and potentially defer and decrease taxes on those capital gains and exclude future related capital gains from taxation. This creates a significant opportunity for taxpayers, and careful strategies should be developed to take advantage of these new tax provisions.
Armstrong Teasdale attorneys have assisted clients in structuring and forming OZ investments and have counseled and advised fund managers, developers, investors and other community and market participants regarding the development of and investment in OZ projects.
The OZ program incentivizes private investment in designated low-income communities that have historically encountered significant barriers to raising and borrowing capital funds. The benefits of investing include deferral of tax liability on capital gains; a decrease over time in the amount of original capital gain included in income; and for OZ investments held over 10 years, all capital gains earned on investing in OZ projects are excluded from taxation.
Our attorneys guide clients in structuring alternatives when establishing qualified OZ funds to invest in businesses or finance projects located in an OZ. In addition, they provide counsel in drafting private placement memoranda, offering circulars and other offering documents to solicit ownership interests from potential investors. They also assist with meeting the applicable administrative and technical requirements, as well as qualifying for exemption from federal and state securities laws in order to avoid higher administrative costs and filing fees.