The Tax Act of 2017 created Opportunity Zones (OZ), which are low-income census tracts where tax benefits are offered for long-term investments in projects within the zone. Opportunity Zones were nominated by governors in each state and certified by the federal government. Virginia has 212 such zones, which can be found on an interactive map here.
To encourage investment in these zones, investors are provided with three benefits to invest:
- Tax deferral – If an investor takes funds from an instrument that is subject to capital gains taxes (stocks, mutual fund, 401(k), etc.), and invests in property or business located within an OZ, they will pay no capital gains on that money until 2026.
- Tax reduction – If the investor keeps the investment in the OZ for at least five years, they will pay capital gains on 90% of the basis, and if they keep the investment for seven years, the basis is reduced to 85%.
- Tax elimination – After 10 years, the capital gains on the OZ investment is eliminated, so any gains are tax-free.
The funds from the sale of the instrument must be placed within a Qualified Opportunity Fund within 180 days. A Qualified Opportunity Fund is a partnership or corporation designed to invest at least 90% of capital held into Opportunity Zone projects. Individual investors can start their own fund or join an existing one to support OZ projects.
Opportunity Virginia has been launched to serve as a marketplace for both investors and investment opportunities. Localities are also encouraged to add properties that are available within their OZ. The experts at Opportunity Virginia can assist you in the effort to get your project off the ground, discovered and funded. They can help you access a network of developers, lawyers, accountants, entrepreneurs, bank, investors and other sources of information and capital.