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Capabilities / Tax-Advantaged Real Estate Strategies / Qualified Opportunity Zone Program
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Qualified Opportunity Zone Program

Tax incentives encouraging long-term capital investment in lower-income communities across the U.S.

Offering Tax Benefits to Investors Through Qualified Opportunity Funds

Created by the Tax Cuts and Jobs Act of 2017, the Qualified Opportunity Zone Program is a tax-incentive program designed to encourage long-term private sector investments in designated communities known as qualified opportunity zones.

Individuals and entities may invest short- or long-term capital gains generated from a wide range of assets into qualified opportunity funds. The potential tax incentives include the deferral of taxes owed, pass-through depreciation, and ultimately the elimination of future capital gains tax on any appreciation of the investment as well as the elimination of any depreciation recapture expense.

Seasoned Partners in QOZ Development

Our joint venture with Silverstein Properties leverages real estate, capital markets, and development capabilities expertise to target opportunity zone investments.

Silverstein Properties is a privately held, full-service real estate development, investment, and management firm. Founded in 1957 by Chairman Larry Silverstein, Silverstein Properties has developed, owned, and managed more than 40 million square feet of office, residential, hotel, retail and mixed-use properties.

Best known for the redevelopment of the World Trade Center, the firm focuses on large-scale, complex development projects that enhance neighborhoods and communities.

Qualified Opportunity Zones (“QOZs”)

A QOZ is a designated census tract in the United States that has been selected by a state governor and certified by the U.S. Department of Treasury for inclusion in the QOZ Program.

To qualify, a census tract must pass a low-income community test based on the most recent census information from 2010. Each state governor can nominate up to 25% of the state’s qualifying census tracts for inclusion in the QOZ Program.

There are 8,700 QOZs spread across all 50 states, D.C., and several U.S. territories.

Qualified Opportunity Funds (“QOFs”)

A QOF is an investment vehicle organized as either a partnership or a corporation holding at least 90% of its assets in QOZ property.

QOFs can invest in a wide variety of businesses, including commercial real estate, housing, infrastructure, and start-up businesses. QOFs can hold single or multiple assets.

Potential Tax Benefits

Deferral

If a taxpayer invests the capital gain from the sale of any property into a QOF within 180 days of recognizing the gain, taxes on such proceeds may be deferred until the earlier of December 31, 20261 or the disposition of the QOF interest. Gains passed through on a K-1 tax form have additional timing flexibility.

Elimination

Investors who hold their investment for at least ten years receive a step-up in basis which means they pay no tax on the appreciation of their QOF investment upon disposition (so long as such disposition occurs prior to January 1, 2048), regardless of the size of the potential profit2. In addition, the step-up in basis eliminates any depreciation recapture tax that would otherwise be owed upon sale.

All investments involve risk, and the realization of the benefits is dependent on proper structuring and the structure and performance of the future investments selected. Not all investments will provide all of these benefits.

1 A 10% step-up in basis was available for investments made prior to December 31, 2021 and an additional 5% step-up in basis was available for investments made prior to December 31, 2019.

2 Assumes that the investor is a resident of a state that conforms with the federal QOZ Program provisions.

Hypothetical Qualified Opportunity Zone Timeline1,2