The IRS and U.S. Treasury have finalized regulations for those interested in investing in qualified opportunity zones (QOZs). QOZs were introduced as part of the 2017 tax reform as a way for taxpayers to temporarily defer income gains by investing corresponding amounts into certain development projects. The new guidelines, along with local incentives, have made the option more appealing to some taxpayers.

In addition to providing clarity on how to make an election to temporarily defer taxes through QOZs, the finalized regulations address how taxpayers can increase the basis in their qualifying investment equal to a fair market value when it’s sold (as long as the equity interests have been held for at least 10 years). Plus, guidance is given to business and property owners who want their entities to become qualified opportunity zone businesses (QOZBs).

The final regulations can be found on the IRS website (click on link here).

In Texas, San Antonio is second only to Houston for the number of opportunity zones it has available. There are 24 designated QOZ tracts in Bexar County, as outlined by the San Antonio Economic Development Department (click on link here). For QOZ developers and business investors, the City of San Antonio offers a Tax Abatement, Fee Waiver Program, Center City Housing Incentive Policy and Tax Increment Financing.

Investing in QOZs and perhaps even starting a QOZB can be great ways to economically bolster low-income areas while receiving a tax break, but they’re tax strategies that shouldn’t be decided without professional tax, financial and legal guidance. As this National Law Review article points out, there are several factors to consider including how the land will be developed and what businesses will be moving in. Feel free to contact us with your tax-related questions.