Rosamaria Bravo, left, and Erick R. Wendelken, right.

Qualified Opportunity Zones were created as a provision of the Tax Cuts and Jobs Act of 2017 (the act). They were designed to encourage investment and real estate development in distressed communities, by offering significant income tax savings and deferrals for investment in such areas.

The IRS defines a Qualified Opportunity Zone as “an economically distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment. Localities qualify as Opportunity Zones if they have been nominated for that designation by the state and that nomination has been certified by the Secretary of the U.S. Treasury via his delegation authority to the Internal Revenue Service.”

As designed, the program offers a number of federal income tax benefits to investors including:

• The ability to defer paying taxes on capital gains until 2026;
• The ability to exclude up to 15% of the capital gain from taxation in 2026; and
• If the investment in the zone is held for at least 10 years, all appreciation is tax free.

Back in October 2018, the Department of the Treasury and the IRS announced the release of new guidelines for investing in Qualified Opportunity Zones (QOZ).