The Procedural Requirements for Opportunity Zone Investing

What are the procedural requirements for opportunity zone investing?

Opportunity Zone investing in Florida entails several procedural requirements in line with federal law. First, investors must ensure their capital gains are invested in a Qualified Opportunity Fund (QOF) within 180 days of realizing the gains. The QOF must invest at least 90% of its assets in Qualified Opportunity Zone Property (QOZP) within specified timeframes. Additionally, investors must ensure compliance with local regulations concerning land use, zoning, and environmental requirements that may affect their investments.

For instance, a real estate developer seeking to invest in an Opportunity Zone project in Miami must comply with federal requirements for QOFs and QOZPs and adhere to local zoning and land use regulations set by the City of Miami and Miami-Dade County.

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Which laws and regulations apply to the procedural requirements for opportunity zone investing in Florida?

Florida’s Opportunity Zone investors must comply with federal and state laws and regulations. At the federal level, the primary governing statute is 26 U.S. Code § 1400Z-2, which outlines the requirements for investing in QOFs and QOZPs. Accompanying this statute are the regulations found in 26 CFR § 1.1400Z2(d)-1, which provide further guidance on the procedural requirements for Opportunity Zone investing.

What are the strategic benefits of opportunity zone investing?

Investors may benefit from the following:

• Tax deferral: Opportunity Zone investments provide a tax deferral on the initial capital gains invested into a QOF until December 31, 2026, or the date of the investment’s sale or exchange, whichever is earlier.
• Tax reduction: Investors who hold their Opportunity Zone investment for at least five years can benefit from a 10% reduction in their deferred capital gains tax liability. Having the investment for seven years increases the reduction to 15%.
• Tax exclusion: When investors hold their Opportunity Zone investment for at least ten years, they are eligible for a 100% exclusion on any additional capital gains generated, effectively making the growth tax-free.
• Community development: Investing in Opportunity Zones can revitalize economically distressed areas, creating positive social impact and benefiting local communities in the long run.
• Diversification: Opportunity Zone investments can add diversity to an investor’s portfolio by providing exposure to various asset classes, industries, and geographic locations.

Please contact our office to set up your initial consultation to determine whether Opportunity Zone investment services may be available for your unique situation.

How should counsel facilitate the procedural requirements for opportunity zone investing?

Counsel should consider the following to protect their clients:

• Understand federal requirements: Legal counsel should familiarize themselves with relevant federal laws and regulations.
• Review specific investment plans: Counsel should analyze the client’s proposed investment plans, ensuring they meet the criteria for QOZP and align with the investor’s objectives.
• Comply with local regulations: Counsel should research and understand local land use, zoning, and environmental regulations for the specific Opportunity Zone where the client plans to invest.
• Establish and monitor a QOF: Legal counsel should assist in setting up a QOF that adheres to federal requirements, including the 90% asset test.
• Track investment timelines: Counsel should help clients maintain compliance with the required holding periods to maximize tax benefits associated with Opportunity Zone investing.
• Perform ongoing due diligence: Legal counsel should continuously monitor the client’s Opportunity Zone investment to ensure continuous compliance with federal and state regulations

When a set of facts is appropriate for legal intervention, there are many paths a claimant may take. We are value-based attorneys at Jimerson Birr, which means we look at each action with our clients from the point of view of costs and benefits while reducing liability. Then, based on our client’s objectives, we chart a path to seek appropriate remedies.

To determine whether your unique situation may necessitate litigation or another form of specialized advocacy, please contact our office to set up your initial consultation.

Frequently Asked Questions

1. What types of investments qualify for Opportunity Zone benefits?

To qualify for Opportunity Zone benefits, investments must be in a QOF that invests in QOZP property within an Opportunity Zone. QOZP includes tangible property, stock, or partnership interests in a QOZB.

2. Can an investor create their QOF?

Yes, investors can create their own QOF by setting up a corporation or partnership that holds at least 90% of its assets in Qualified Opportunity Zone Property. The QOF must self-certify with the IRS by filing Form 8996 with its federal income tax return.

3. How does an investor determine if a property is in a designated Opportunity Zone?

Investors can determine if a property is in an Opportunity Zone by using the U.S. Treasury’s Opportunity Zone map. Additionally, they should consult with legal counsel to verify the property’s eligibility for Opportunity Zone investment.

Have more questions about how Opportunity Zone investing could impact you?

Crucially, this overview of the procedural requirements for opportunity zone investing does not begin to cover all the laws implicated by this issue or the factors that may compel the application of such laws. Every case is unique, and the laws can produce different outcomes depending on the individual circumstances.

Jimerson Birr attorneys guide our clients to help make informed decisions while ensuring their rights are respected and protected. Our lawyers are highly trained and experienced in the nuances of the law, so they can accurately interpret statutes and case law and holistically prepare individuals or companies for their legal endeavors. Through this intense personal investment and advocacy, our lawyers will help resolve the issue’s complicated legal problems efficiently and effectively.

Having a Jimerson Birr attorney on your side means securing a team of seasoned, multi-dimensional, cross-functional legal professionals. Whether it is a transaction, an operational issue, a regulatory challenge, or a contested legal predicament that may require court intervention, we remain tireless advocates at every step. Being a value-added law firm means putting the client at the forefront of everything we do. We use our experience to help our clients navigate even the most complex problems and come out the other side triumphant.

If you want to understand your case, the merits of your claim or defense, potential monetary awards, or the amount of exposure you face, you should speak with a qualified Jimerson Birr lawyer. Our experienced team of attorneys is here to help. Call Jimerson Birr at (904) 389-0050 or use the contact form to schedule a consultation.