The IRS released Opportunity Zone FAQs on April 24 explaining that an eligible entity will be able to self-certify to become a Qualified Opportunity Fund (QOF) by filing a form (to be released this summer) with its timely filed (including extensions) federal income tax return for the taxable year.
The tax benefits of investing in Opportunity Zones are available only to the extent that eligible amounts are timely invested in a QOF. To be a QOF, an entity must be a corporation or partnership organized as an "investment vehicle" for the purpose of investing in qualified property within an Opportunity Zone that holds at least 90 percent of its assets in such property. (See our E-Alerts on the tax incentives available to investors in QOFs, the Opportunity Zone designation process, and the first wave of such designations in April 2018.)
This IRS Q&A establishes the simplified certification process that many investors and fund managers have been hoping for. Self-certification should result in a faster and less expensive process than the Treasury Community Development Financial Institutions Fund's certification process for community development entities in the New Markets Tax Credit Program. Just how simple this process will be, of course, depends on what is required in the actual form released by the IRS.
Ballard Spahr will monitor guidance from the IRS on Opportunity Zone Funds and provide updates when guidance is released.
Attorneys in Ballard Spahr's Public Finance Department and Tax Group have extensive experience working with clients on tax incentive programs for economically distressed areas. For further advice about Qualified Opportunity Zones, please contact Wendi L. Kotzen, Linda B. Schakel, or Adam S. Wallwork.
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