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Why Invest in Opportunity Zones?

Designed to encourage long-term investment in low-income communities, Opportunity Zones offer investors incentives for putting their capital to work in low-income communities:

  • Investors can roll existing capital gains into Opportunity Funds with no up-front tax bill.
  • A  5-year holding increases the rolled-over capital gains basis by 10%
  • A 7-year holding increases the rolled-over capital gain investment basis 5% for a total of 15%
  • Investors can defer their original tax bill until December 31, 2026, at the latest, or until they sell their Opportunity Fund investments, if earlier.
  • Opportunity fund investments held in the fund for at least 10 years are not taxed for capital gains.

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Investor Benefits

Investments made by qualified entities known as Opportunity Funds into certified Opportunity Zones will receive three key federal tax incentives to encourage investment in low-income communities including:

The Opportunity Zones program offers three tax incentive for investing in low-income communities through a qualified Opportunity Fund.

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Temporary Deferral

A temporary deferral of inclusion in taxable income for capital gains reinvested into an Opportunity Fund. The deferred gain must be recognized on the earlier of the date on which the opportunity zone investment is disposed of or December 31, 2026

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Step-Up In Basis

A step-up in basis for capital gains reinvested in an Opportunity Fund. The basis is increased by 10% if the investment in the Opportunity Fund is held by the taxpayer for at least 5 years and by an additional 5% if held for at least 7 years, thereby excluding up to 15% of the original gain from taxation.

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Permanent Exclusion

A permanent exclusion from taxable income of capital gains from the sale or exchange of an investment in an Opportunity Fund if the investment is held for at least 10 years. This exclusion on applies to gains accrued after an investment in an Opportunity Fund.

What are Opportunity Funds?

Opportunity Funds are a new class of investment vehicles that aim to responsibly drive much-needed capital into rural and low-income urban communities. Opportunity Funds will activate passive holdings by connecting investors to investment opportunities located in newly designated Opportunity Zones.

This concept – originally introduced in the Investing in Opportunity Act (IIOA) – is the first new community development tax incentive program introduced since the Clinton Administration. The program will allow U.S. investors to receive a temporary tax deferral and other tax benefits when they reinvest unrealized capital gains into O Funds for a minimum of five years. Today, trillions of dollars in unrealized capital gains are held in stocks and mutual funds alone. This capital could soon be invested in Oz Opportunity Fund to uplift local economies throughout the nation.

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