Opportunity Zones: What the New Rules Mean for Real Estate

In the last days of 2019, the Trump administration released its final rules on Opportunity Zones. It’s a topic ComReal has covered extensively in the past, and the new rules may have a major impact on commercial real estate in our region.

The Opportunity Zone program, which provides tax incentives for the development of economically distressed communities, was created in 2017, but it’s been in limbo while issues of eligibility and investment were sorted out. After multiple revisions, the US Department of Treasury released a final, 544-page report. Here are some of the key takeaways commercial realtors, developers, and investors should be aware of:

  • The period for investing gains from the sale of business assets will now begin on the date of the sale, as opposed to at the end of the year the assets were sold.
  • Only eligible gains taxable in the US may be invested in a qualified OZ fund.
  • Non-resident foreign individuals and corporations may make OZ investments with capital gains that are “effectively connected” to a US trade or business.
  • The entire amount of capital gains from the sale of investments can be invested in a qualified fund, as opposed to only amounts greater than the losses from those sales
  • New construction can receive investment from a fund.

Supporters say these new regulations will make it easier for certain real estate projects to qualify for tax advantages, and for a wider group of investors to profit from the program. According to a recent report from Bisnow, these new changes already led to an end-of-year rush on investments: Opportunity Zones raised over $2B of equity in the month of December alone.

Our team at ComReal can help you identify property within Opportunity Zones that are for sale and have re-development potential. We can also point you to our team of experts that can decipher complex terms such as Qualified Opportunity Fund, Qualified Opportunity Zone Property and Qualified Opportunity Zone Business.

Additionally, if you own a property, we can help you determine if it falls within an opportunity zone, and which strategies we can use to maximize the value of the property.

Click here to download our complete Opportunity Zone PDF created by ComReal’s Pat McBride. Contact McBride at 305-619-2937 or at pmcbride@comreal.com.