OPPORTUNITY ZONE PROSPECTUS

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OPPORTUNITY ZONE PROSPECTUS

Did you know the City of Parkersburg has TWO Opportunity Zone designations out of 55 statewide? Our office partnered with Downtown PKB to put together the Opportunity Zone prospectus below. We pulled out old projects from Parkersburg’s past that never were quite able to come to fruition. We’re hoping by sharing this prospectus, someone may find a good idea for a project that they’d like to do in Wood County and we’re here to help every step of the way. Enjoy!

The information below is from LISC.org

Q: What are Opportunity Zones?  
A: Opportunity Zones are economically-distressed communities, designated by states and territories and certified by the U.S. Treasury Department, in which certain types of investments may be eligible for preferential tax treatment. The tax incentive is designed to spur economic development and job creation in distressed communities by providing these tax benefits to investors.  Effective June 14, 2018, Treasury certified Opportunity Zones of all states, territories and the District of Columbia. Opportunity Zone designations certified by Treasury will remain in effect until December 31, 2028. 

Opportunity Funds and Businesses

Q: What is an Opportunity Fund?
A: A qualified Opportunity Fund is any investment vehicle organized as a corporation or partnership with the specific purpose of investing in Opportunity Zone assets. The fund must hold at least 90 percent of its assets in qualifying Opportunity Zones property. 

Q: Who can create an Opportunity Fund?
A: Any taxpaying individual or entity can create an Opportunity Fund, through a self-certification process. A form (expected to be released in the summer of 2018) is submitted with the taxpayer’s federal income tax return for the taxable year.  

Q: What can Opportunity Funds invest in?
A: Opportunity Funds can invest in any qualified Opportunity Zone property, including stocks, partnership interest or business property (so long as property use commences with the fund, or if the fund makes significant improvements to the qualifying property).

Q: Will Opportunity Zone businesses need to conduct most of their business within Opportunity Zone tracts, or will it be sufficient if the majority of the business’ assets are located in Opportunity Zone tracts (property, equipment, etc.)? For example, would a trucking business based in an Opportunity Zone, but serving a whole region, qualify for Opportunity Fund financing?
A: To qualify as an eligible Opportunity Zone Business, a business must demonstrate that substantially all its tangible business property is located within a Qualified Opportunity Zone. No such stipulations have been made regarding the service area of the Opportunity Zone Business in the statute, but this may nonetheless be an item that the IRS chooses to address in future guidance or regulations. 

Q: What happens if a business located in an OZ moves? Is there a recapture risk?
A: There is no recapture risk, but an opportunity fund that fails to meet the 90% asset requirement of the fund will be required to pay a penalty for each month it fails to meet the requirement. The penalty is not designed to be catastrophic, but rather, to ensure that funds stay within the zone’s parameters. Once an asset no longer qualifies, there will be a period of time in which the asset can be disposed of before incurring penalties.

Q: Can an Opportunity Fund make investments in multiple Opportunity Zones?
A: Yes – so long as an Opportunity Fund has at least 90% of its assets in qualified Opportunity Zone property, the fund may invest in as many qualified tracts as desired.

Q: Can an investor invest directly into an Opportunity Zone business to qualify for associated tax incentives?
A: No – an investor must invest in an Opportunity Zone business through a qualified Opportunity Fund in order to qualify for associated tax incentives.

Q: What tax benefits are available for investors that invest into an Opportunity Fund?  
A: There are primarily three benefits available to investors that invest previously realized capital gains into an Opportunity Fund, with increasing benefits the longer the investment is held in the Fund:

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Lindsey Kerr