The U.S. government is attempting to attract private investment money into economically disadvantaged communities in order to boost economic growth and job creation. Under the Tax Cuts and Jobs Act, the states, D.C., and U.S. possessions nominate low-income communities eligible for these tax benefits. On April 9, 2018, the Treasury and the IRS announced the first round of Opportunity Zone designations for 18 states. There are two elections that incentivize investment in Qualified Opportunity Zones:
- Temporary deferral of inclusion in gross income of capital gains reinvested in a Qualified Opportunity Zone.
- Permanent exclusion of capital gains from the sale/exchange of an investment in a Qualified Opportunity Zone.
These two elections may provide substantial tax benefits.
Read more about Qualified Opportunity Zones and related guidance from the IRS.