On Thursday, the Trump administration finalized regulations officially implementing its Qualified Opportunity Zone (“QOZ”) program.
The initiative was created by Congress as part of the 2017 Tax Cuts and Jobs Act. Designed to encourage economic growth in underserved communities through various unique tax incentives, the rule has been championed by NAR and is being welcomed by the real estate industry.
The U.S. Treasury Department and the Internal Revenue Service will oversee the temporary program, which is scheduled to fully sunset on December 31, 2047.
The final rules clarify eligible subsidies within the program and outline qualification standards. Thursday’s regulations also provide guidance “regarding the types of gains that qualify for Opportunity Zone investments, as well as gains that may be excluded from tax after a 10-year holding period,” the Treasury Department wrote in its press release accompanying the announcement.
Among the tax benefits for QOZ investors, capital gains reinvested within 180 days into an Opportunity Fund are tax-deferred through 2026 and can qualify for as much as a 15% reduction when the tax is finally paid, assuming the investment in the new Fund is not sold before then. In addition, gains accrued on investments in a QOZ are free of capital gains tax if they are held for at least ten years. An Opportunity Fund is a partnership or a corporation organized for the purpose of investing in QOZ property, is self-certified, and must hold at least 90% of its assets in QOZ property.