Opportunity Zones

A new opportunity for taxpayers under the new U.S. tax law.

Watch our video to learn the basics about the potential tax benefits for businesses who invest in Qualified Opportunity Zones across the United States

 

 

Latest news: Proposed regulations: Qualified opportunity zone funds under section 1400Z-2

The U.S. Treasury Department and IRS released a version of proposed regulations (REG-120186-18) and a notice of withdrawal of earlier proposed regulations as guidance and to provide additional details about investment in qualified opportunity funds under section 1400Z-2.

 

 

 

A new opportunity for taxable investors and businesses

The 2017 Tax Act added section 1400Z, which allows for the deferral and partial exclusion of gains from the sale or exchange of any asset that is reinvested in a Qualified Opportunity Fund (Q Fund) that invests in property or businesses located in designated as Qualified Opportunity Zones (QOZ). QOZs generally are low-income areas across the United States, the U.S. territories and the District of Columbia. In addition, any further gains generated through an investment in a Q Fund may be permanently excluded from income if held for at least 10 years.

 

 
 

Opportunity knocks

 

Insights from KPMG

In this publication, KPMG presents insights on the Opportunity Zones program. Learn more about the potential tax benefits, necessary qualifications based on recent proposed regulations, and the timeframe to act in order to enhance tax savings.

Download it today here.

 
 

 

The provision provides these tax incentives:

 
 

Tax incentive #1

Q Fund investors may defer gains realized upon the sale or exchange of property if the gain proceeds are reinvested within 180 days into a Q Fund.  At the time of the investment, the basis in the Q Fund is zero.

 
 
 
 

Tax incentive #2

Basis of the Q Fund investment increases by 10 percent of the deferred gain if held for 5 years from the date of reinvestment, and an additional 5 percent after 7 years for a total of 15 percent.  The gain must be recognized the earlier of the date that the Q Fund investment is sold or December 31, 2026. Consequently, for Q Fund investments made in 2018 and held for 7 years, the taxpayer will recognize a 15 percent reduction in taxable gain.

 
 
 
 

Tax incentive #3

Any appreciation on investments in Q Funds that are held for at least 10 years are excluded from gross income – therefore, if held for 10 years, any gain on the investments is tax free.

 
 

 

KPMG can assist in determining if you might benefit from investing in a QOZ area through our two-phase approach:

 
 

Zone qualification & feasibility:

  • Determine the applicability and economic/tax benefits of a QOZ investment
  • Assemble a business incentive feasibility study
  • Prepare a project profile for economic development representatives
  • Assist in responding to inquiries from economic development representatives
 
 
 
 

Implementation & compliance:

  • Review for qualification purposes of the gain to be deferred under Opportunity Zone rules
  • Review Q Fund formation documents for a partnerships or corporations
  • Review contribution and partnership agreements for federal and state tax implications
  •  Assist the Q Fund in acquiring assets to satisfy the Q Fund qualified asset test
  •  Compliance support with respect to Q Funds
  • Audit and advisory services, as needed
  • Monitor Q Funds for continuing compliance under the Opportunity Zone requirements
 
 

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Webcast replay

Listen to our recent Webcast on Opportunity Zones.

 

Insights from KPMG

OIRA review completed; proposed regulations under qualified opportunity funds

OMB’s Office of Information and Regulatory Affairs (OIRA) reported that it has completed review of proposed regulations from the U.S. Treasury Department as guidance for qualified opportunity funds under section 1400Z-2—a provision of the U.S. tax law (Pub. L. No. 115-97, that is also known as the “Tax Cuts and Jobs Act” (TCJA)) enacted in December 2017.

Proposed regulations: Qualified opportunity zone funds under section 1400Z-2

The U.S. Treasury Department and IRS released a version of proposed regulations (REG-120186-18) and a notice of withdrawal of earlier proposed regulations as guidance and to provide additional details about investment in qualified opportunity funds under section 1400Z-2.

Regulations pending OIRA review

OMB’s Office of Information and Regulatory Affairs (OIRA) acknowledged receipt of proposed regulations from the U.S. Treasury Department as guidance for qualified opportunity funds under section 1400Z-2—a provision of the U.S. tax law (Pub. L. No. 115-97, that is also known as the “Tax Cuts and Jobs Act” (TCJA)) that was enacted in December 2017.

KPMG report: New rules for Opportunity Zones

Read our summary of the recently proposed regulations for the Opportunity Zone provisions.

Are businesses considering investing in QOFs?

Opportunity Zones are the buzz, but are organizations considering pursuing them? See how participants responded when polled to questions about QOFs during our recent TaxWatch Webcast on Opportunity Zones.

Opportunity Zones and privately held companies

Are Opportunity Zones a potentially worthwhile investment for private companies and family offices? Find out in our recent issue of Privately Speaking.

 

 

Derive the potential QOZ benefit

Example: QOZ investments made 

 

Contact us

 
 
Joseph Scalio

Joseph Scalio

Senior Lead Tax Partner, KPMG (US)

+1 267-256-2778
 
 
 
 
Richard Blumenreich

Richard Blumenreich

Principal-in-Charge, Tax, KPMG (US)

+1 202-533-3032
 
 
 
 
Susan Reaman

Susan Reaman

Director, Tax, KPMG (US)

+1 202-533-3541
 
 
 
 
Orla O'Connor

Orla O'Connor

Tax Principal, KPMG LLP

+1 415-963-7511

 

 

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