All 25 R.I. ‘Qualified Opportunity Zones’ approved by feds

Chris Bergenheim

05/22/2018

ALL 25 Qualified Opportunity Zones nominated by Rhode Island to the U.S. Department of Treasury and the IRS were approved. / COURTESY R.I. COMMERCE CORP. — ALL 25 Qualified Opportunity Zones nominated by Rhode Island to the U.S. Department of Treasury and the IRS were approved. Areas in purple were submitted to the federal program and received QOZ designation, while areas in green were eligible but not submitted. Rhode Island submitted the maximum number of designations allowed./ COURTESY R.I. COMMERCE CORP.

PROVIDENCE – All 25 areas that Gov. Gina M. Raimondo and the R.I. Commerce Corp. submitted for designation as “Qualified Opportunity Zones” were approved by the U.S. Department of the Treasury and the Internal Revenue Service, the Treasury Department announced last week.

The designation, included in the Tax Cuts and Jobs Act, allows states to nominate low-income communities in which areas received preferential tax treatment for new investments. The program is intended to spur investment in distressed communities.

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“I am very excited about the prospects for Opportunity Zones. Attracting needed private investment into these low-income communities will lead to their economic revitalization and ensure economic growth is experienced throughout the nation,” said U.S. Treasury Secretary Steven T. Mnuchin in a statement in April about the program.

Qualified Opportunity Zone benefits

The program allows QOZ investors to defer tax on any capital gains until an investment is sold or exchanged or Dec. 31, 2026 (whichever is the earlier date), so long as the gain is reinvested in a Qualified Opportunity Fund.

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An Opportunity Fund is an investment vehicle that is set up as either a partnership or corporation for investing in eligible property that is located in an Opportunity Zone and that utilizes the investor’s gains from a prior investment for funding.

The QOZ program also allows an investor to hold a qualified investment in the Opportunity Fund for at least 10 years, at which time the investor would be eligible for an increase in the basis of the investment equal to its fair market value on the date that the investment is sold or exchanged.

In other words, the program will allow investors to defer paying capital gains taxes related to the program, and will reduce those taxes over time, eventually eliminating taxes on capital gains related to the investment at the 10-year mark.

Investors do not need to live in a designated opportunity zone to take advantage of the program but must self-certify with the IRS as a Qualified Opportunity Fund and invest in eligible property in an Opportunity Fund Zone.

The federal revenue program was enacted in February, according to the IRS, but it is currently working on final guidance for the program.

Rhode Island’s designated QOZs: