opportunity zone policies clarified by treasury department

Final rules governing Opportunity Zone development and construction projects have now been released by the Department of the Treasury.

Those rules state that if a developer or investor purchased a structure for a reduced amount because it exists inside a defined Opportunity Zone, that doesn’t mean they have to spend all of the amount saved on renovating that structure.

According to Treasury Department officials, the new rule will make it substantially easier for developers to use the money saved from a reduced-price purchase for the purchase of another structure, also within an Opportunity Zone.

The new rules also state that even though capital gains by U.S. companies and individuals are eligible to be invested in an Opportunity Zone by, non-resident foreign companies and individuals can still make investments in those zones.

The updated Treasury Department rules, notes the Miami Herald, clarifies “what types of developments can receive investments from a fund, namely, new construction. Previously it was not clear if that category strictly applied.”

The Opportunity Zone program was incorporated into the Tax Cuts and Jobs Act of 2017 and has been designed to encourage investment in areas across the country that have been identified as low-income communities.

That investment is encouraged through a series of federal tax breaks for real estate investors and developers who invest in the defined zones.

That investment has particularly targeted existing older structures in need of renovation and upgrading.

There are currently 8,700 defined Opportunity Zones nationally.

According to a survey conducted by the accounting services firm Novogradac, Opportunity Zone investment currently stands at $4.5 billion, up from less than $3 billion in early 2019.

Of that amount, more than half of the investment has gone for mixed-use projects, while 36 percent has targeted residential development and construction, with a smaller 15 percent used for commercial projects.

By Garry Boulard

---