Opportunity Zones

Our Opportunity Zones Tax Services team can help you navigate the allowable tax benefits, affording you the extra cash to invest in future developments.

Opportunity Zones: A New Investment Opportunity

Community Revitalization by Rewarding Private Investment

Are you interested in reviving hard-hit areas in your community? Could you use a tax benefit, too? The Opportunity Zones program, enacted as part of the Tax Cuts and Jobs Act of 2017, provides an opportunity to do both.

The Opportunity Zones program, found in Sections 1400Z-1 and 1400Z-2 of the Internal Revenue Code (IRC), is intended to spur investment in low-income or economically disadvantaged areas.

The tax incentives provide investors with an opportunity to defer recognition of gains on sales of assets, permanently reduce a portion of the deferred gain to be recognized and permanently exempt any future gain with respect to reinvested proceeds. This occurs by reinvesting the gain in a Qualified Opportunity Fund (QOF), an investment vehicle specifically focused on making investments in Qualified Opportunity Zone (QOZ) businesses and/or property, allowing for greater diversification than other tax deferral mechanisms.

Tax Incentives Available

Temporary deferral for recognition of realized gainuntil as late as December 31, 2026
- To the extent gain portion of proceeds is reinvested in QOF within180 days of the sale or exchange of any asset, gain is not required to be recognized in year of sale
- Gain deferred is recognized upon the earlier of the date theinvestment in QOF is sold, or December 31, 2026
Permanent reduction of deferred gain depending onwhen the investment was made and how long the investment in QOF is held
- Calculation of 10% and 5% step up for qualifying investments
Exemption from realized gain on QOF investment held
at least 10 years
- Gain on subsequent appreciation is eligible for permanent exemption from tax

Partner With Cherry Bekaert for a Seamless Investment Process

Fund Organization and Structuring for Opportunity Zone Compliance

Review the overall objective of QOF and investments intended to be made, identify potential issues and address as necessary with company and legal advisors.
Coordinate with company attorneys on requirements for QOFs and fund partnership structure to address any identified issues.
Review the partnership agreement for QOF and provide comments to ensure the qualification of funds and interests held by investors and sponsors.
Review and ensure contributions to the QOF qualify, i.e., confirm funds are coming from capital gains incurred in the last 180 days (or slightly different timing depending on investor type).

Investment Planning for Qualified Assets or Trade or Business of the Fund

Review planning for investment in assets or trade or business to be acquired by QOF or Qualified Opportunity Zone Business (QOZB).
Identify issues to be addressed in the structure of QOZBs, and other investors in the QOZB, including General Partner or other QOFs.
Evaluate other sources of capital to be used in funding the projects or businesses held by QOZB, including New Markets Tax Credits, Historic Tax Credits, State Tax Credits or other equity and financing sources.
Review draft operating agreements from attorneys to ensure qualifications for opportunity zones rules related to QOF and QOZB are met.

Income and Asset Testing and Compliance for Qualified Opportunity Zone Businesses

Assess and monitor (quarterly preferred but at least semiannually) asset and income compliance testing for QOZB and address any issues to be cured, as necessary, or to meet safe harbor provisions as allowed under IRS rules.
Prepare annual tax returns for QOZB and test underlying assets for qualification and reporting to QOF investors, and any specific state filings required to comply with any specific opportunity zone rules at the state level.
Identify and address transaction matters as they arise during the development period or initial start-up of the trade or business held by the QOZB.

Asset Testing and Compliance for Qualified Opportunity Funds

Assess and monitor (quarterly preferred but at least semiannually) asset and compliance testing for QOF, and address as necessary cures of any issues in the testing, as allowed under IRS rules.
Prepare annual tax returns for QOF and Form 8996 testing and reporting, and any specific state filings required to comply with any specific opportunity zone rules at the state level.
Identify and address transaction matters as they arise during the period the QOF is invested in opportunity zone assets and their underlying development or QOZBs.

Fund Organization and Structuring for Opportunity Zone Compliance

Review the overall objective of QOF and investments intended to be made, identify potential issues and address as necessary with company and legal advisors.
Coordinate with company attorneys on requirements for QOFs and fund partnership structure to address any identified issues.
Review the partnership agreement for QOF and provide comments to ensure the qualification of funds and interests held by investors and sponsors.
Review and ensure contributions to the QOF qualify, i.e., confirm funds are coming from capital gains incurred in the last 180 days (or slightly different timing depending on investor type).

Investment Planning for Qualified Assets or Trade or Business of the Fund

Review planning for investment in assets or trade or business to be acquired by QOF or Qualified Opportunity Zone Business (QOZB).
Identify issues to be addressed in the structure of QOZBs, and other investors in the QOZB, including General Partner or other QOFs.
Evaluate other sources of capital to be used in funding the projects or businesses held by QOZB, including New Markets Tax Credits, Historic Tax Credits, State Tax Credits or other equity and financing sources.
Review draft operating agreements from attorneys to ensure qualifications for opportunity zones rules related to QOF and QOZB are met.

Income and Asset Testing and Compliance for Qualified Opportunity Zone Businesses

Assess and monitor (quarterly preferred but at least semiannually) asset and income compliance testing for QOZB and address any issues to be cured, as necessary, or to meet safe harbor provisions as allowed under IRS rules.
Prepare annual tax returns for QOZB and test underlying assets for qualification and reporting to QOF investors, and any specific state filings required to comply with any specific opportunity zone rules at the state level.
Identify and address transaction matters as they arise during the development period or initial start-up of the trade or business held by the QOZB.

Asset Testing and Compliance for Qualified Opportunity Funds

Assess and monitor (quarterly preferred but at least semiannually) asset and compliance testing for QOF, and address as necessary cures of any issues in the testing, as allowed under IRS rules.
Prepare annual tax returns for QOF and Form 8996 testing and reporting, and any specific state filings required to comply with any specific opportunity zone rules at the state level.
Identify and address transaction matters as they arise during the period the QOF is invested in opportunity zone assets and their underlying development or QOZBs.

Unlock the Benefits of Opportunity Zones

Looking to unlock the benefits of Opportunity Zones and drive sustainable economic growth in your community? Our team of professionals can help you navigate the complex regulations and maximize the potential of these tax incentives. We can assist you in identifying and analyzing Opportunity Zone investments, structuring deals to meet regulatory requirements, and managing compliance. Don't miss out on this valuable opportunity! Take the first step towards utilizing Opportunity Zones for your business.

Opportunity Zone Services

Cherry Bekaert has an established Opportunity Zones team with technical knowledge of key tax, accounting, transaction structuring and compliance issues. Our Opportunity Zone services provide you with the tools you need to make the right investment decision.

Services for Funds and Project Sponsors

Cherry Bekaert is uniquely positioned to help Funds and project sponsors take advantage of the opportunity zones program by providing:
- Fund organization and structuring for qualification under the rules
- Investment planning for qualified assets or trades or business of the Fund
- Asset testing and compliance for Qualified Opportunity Funds
- Income and asset testing and compliance for Qualified Opportunity Zone Businesses
Funds for Individual Investors

For individual investors, Cherry Bekaert provides guidance in investment fundamentals and assists with the following:
- Review private placement memorandum or prospectus for opportunity zone program qualifications
- Advise on rolling over eligible gains into opportunity zone funds
- Provide projected tax returns and net present value for fund/project comparison
- Tax modeling to compare opportunity zone investment with 1031 exchange and other long-term investments

Featured Opportunity Zone Insights

The Evolving Opportunity Zone Fund: Where Are We Now?

To succeed in the Opportunity Zone program, it's essential to be aware of the latest trends, challenges, and strategies. Gain a comprehensive understanding of the program's current status to maximize your success.
Tax Considerations When Disposing of Qualified Opportunity Zone Business Property

Maximize your returns when disposing of your Qualified Opportunity Zone Business Property. Our tax guidance can help you navigate complexities and make informed decisions for deferred gains and potential tax benefits.
Common Pitfalls Involving the Opportunity Zone Working Capital Safe Harbor

Running into problems with the Opportunity Zone Working Capital Safe Harbor? Tune in for a discussion on the recurring issues and tips to help you navigate the challenges and adequately prepare for this period.
Utilizing Opportunity Zones to Maximize Your Investment

Discover how Cherry Bekaert assisted a real estate investment firm in utilizing the Opportunity Zone program to achieve tax savings and generate tax-exempt growth.