More Clarity Promotes Increased QOZ Investing

The legislation went through two rounds of regulatory guidance but still left many questions (credit: Urban Catalyst).

SAN FRANCISCO—The Tax Cuts and Jobs Act section 1400Z-2 of the tax code relates to capital gains that may be deferred as a result of an investment in a qualified opportunity fund/QOF that holds property and operates in a qualified opportunity zone/QOZ. At the end of 2019, this legislation had gone through two rounds of regulatory guidance from the government, but still left many unanswered questions. With final regulations released last month, investors finally have clarity on a host of issues, and some of the new rules and expansions will make investment, development and operation of projects in QOZs even more attractive, according to Urban Catalyst.

In fact, Reid Thomas, executive vice president and general manager of NES Financial’s Specialty Financial Administration, believes that December investments alone will equal the cumulative investments into the program since its inception. Opportunity zone investment spiked in December with more than $2 billion of equity raised, according to newly released data. This increase underscores the requirement investors had to place capital gains in a QOZ fund by the end of 2019 to get the maximum 15% discount on those gains.