The Trump administration has finally released a new round of regulations that govern Opportunity Zone investments. Here are a few important takeaways for the real estate industry:
- The rules permit a fund to investment in more than one asset, reducing the risk of a single bad project wiping out any return.
- Investors get the tax benefit if they’ve held their stake in the fund for at least 10 years –– the fund is not required to own the asset for a full decade.
- Funds are allowed to refinance their properties.
- Funds get a one-year grace period to sell assets and then reinvest the proceeds into a new Opportunity Zone investment.
- Investors are permitted to buy into a fund by directly purchasing an interest or buying another partner out.
- Leased properties could also qualify for the tax benefit.
Worth repeating: The provision allows investors to defer capital gains taxes, and avoid paying taxes on further appreciation from investments in the opportunity zone fund. Read the Treasury Department’s complete guidance here.
Important point: “When the gain is later recognized (e.g. upon the earlier of the sale of the Opportunity Fund interest or December 31, 2026), the partnership’s partners will be taxed on the recognized gain at such later time.”
Heard in the White House: President Trump noted that developers have previously shied away from certain distressed areas… “But when they see tax rates all the way down to a big, fat beautiful number of zero they start liking the location.”