State and local governments will likely play a significant role in both identifying and supporting Opportunity Zone Fund projects. While governments won't be Opportunity Zone Fund investors—because they don't pay income tax, they will play an integral roll in Opportunity Zone Fund projects and will potential form public-private partnerships to manage these projects, according to Kristin DeKuiper at law firm at Holland & Knight.

“State and local governments are expected to play a significant role in identifying worthy projects, providing additional state and local incentives to make projects feasible, and bringing together projects and potential investors,” DeKuiper, a transactional attorney at Holland & Knight, tells GlobeSt.com. “It is possible that local and state governments will joint venture with private parties to form opportunity funds, or, through an affiliate, will act as managers of qualified opportunity funds. Public-private partnerships for the development of infrastructure projects, if developed under private ownership, may be prime candidates for opportunity fund investments.”

In addition to working with developers on the projects themselves, state and local governments will also provide guidance through the process of investing in designated Opportunity Zone Fund communities. “State and local governments may also sponsor educational programs or opportunity zone marketplaces highlighting projects in their communities,” explains DeKuiper. “In order to get their projects in the front of the line for prospective investors, the [investment] timeline will push investors towards early investments will push government actors to get their opportunity zone programs moving as soon as possible as well.”

Already, DeKuiper has seen tremendous interest from investors for these projects, and says that the benefits are available to investors across the spectrum. “There are likely several subsets of the investment community that may be attracted to this incentive,” she says. “One group is high-net-worth individuals, who may be clients of various investment firms or banks. Another is real estate fund investors, another social impact investors, another family offices and businesses. Participants in other kinds of community development incentives, such as the low-income housing or new markets tax credits, already invest in many of the same communities that qualify as opportunity zones and are interested in a new tool. Corporations with headquarters or significant presence in an opportunity zone that have significant and predictable capital gain may be interested in investing in their own community. Real estate developers are looking at making deferred gain investments in their next project.”

Interest has already come from each of these investment groups, and once the guidelines are outlined, this should be an active investment space. “There are no limits on the number of opportunity funds that can be formed or the amount of capital gain that can be deferred through an investment in an opportunity zone, and there is no minimum investment,” adds DeKuiper. “The shape of the market has yet to be determined. The key area to focus on now is how to efficiently bring together the potential investors and the appropriate projects.”

Instant Insights /

Local Governments to Play Major Role in Opportunity Zone Projects

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