Qualified Opportunity Zones: COVID-19 Updates, Proposed Legislation, New Rules and Regulations

Deferred Capital Gains and Tax Abatement Under IRC Section 1400Z; Forming Opportunity Funds; CARES Act Changes

Note: CPE credit is not offered on this program

Recording of a 90-minute premium CLE webinar with Q&A


Conducted on Tuesday, July 14, 2020

Recorded event now available

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Program Materials

This CLE webinar will give real estate and finance counsel a working knowledge of Qualified Opportunity Zones (QOZs) and Qualified Opportunity Funds (QOFs) created under the 2017 tax reform and clarified by regulations released in December 2019 along with updates for rules, regulations, and timelines during COVID-19 including Notice 2020-39.  Additionally, the panel will discuss proposed QOZ legislation for economic stimulus through equity investment.

Description

Tax reform created a significant new economic development tool, QOZs, that encourages private investment in businesses, projects and commercial property located in designated census tracts. IRC Sections 1400Z-1 and 1400Z-2 allow real estate and other investors to defer current capital gains, significantly increase basis in long-term investments, and qualify for tax abatement by reinvesting capital gain proceeds in QOFs.

Governors from all states have now designated areas as QOZs eligible for tax-advantaged investment for 10 years. In October 2018, April 2019, and December 2019, the IRS issued proposed and final that provide clarity on the various requirements to qualify as a QOF and the requirements an entity must meet to qualify as a Qualified Opportunity Zone Business. It has also indicated that the approval process for QOFs is on a self-certification basis by funds on initial tax return filings.

To leverage the tax benefits of the program, a taxpayer must (subject to any extension under recent provisions) reinvest capital gain proceeds in a QOF within a relevant 180 days period following the date of the sale or exchange of a capital asset. Further, the QOF must maintain at least 90% of assets in Qualified Opportunity Zone Property, directly or through equity or partnership holdings. Counsel must grasp structuring requirements to qualify for, and preserve, these tax benefits through the life of an investment.

Listen as our authoritative panel analyzes requirements for investment in QOZs and how to structure QOFs and QOZBs to obtain the capital gain deferral and step up in the basis provided under the new tax law.

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Outline

  1. Market Update in COVID-19
    1. QOZ History
    2. QOZ Creation under tax reform bill: designation by the states
    3. Types of QOZ investment: commercial real estate and operating businesses
  2. COVID-19 Rules and Regulation Updates
    1. Technical Corrections
    2. Treasury Notice 2020-39
    3. Additional Relief Requests
  3. QOZ Legislative Proposals
    1. Equity Stimulus
    2. Curtis Bill
  4. Final Regulations
    1. Important Extensions for Investors, Qualified Opportunity Funds, and Qualified Opportunity Zone Businesses
    2. Important Proposals for Investors
    3. Proposals to stimulate QOF utilization and deployment into QOZs
    4. Expansions of QOZs
  5. Investment and working capital deadlines extended under the CARES Act and recent rulings and regulations

Benefits

The panel will review these and other critical issues:

  • What are QOZs and how are they determined?
  • What are the tax deferral and tax abatement features of qualifying investments?
  • How are QOFs approved and what is the preferred entity structure?
  • When must the reinvestment of capital gains be made and how long must it be held to qualify for the tax benefits?
  • Timing issues and strategies for investment in QOFs
  • Substantial improvement test
  • What significant questions are subject to further Treasury guidance or proposed Treasury regulations?
  • How might QOFs be used in real estate development and finance, and can they be twinned with other tax incentives?

Faculty

Bailine, Ryan
Ryan D. Bailine

Shareholder
Greenberg Traurig

Mr. Bailine’s practice focuses on the development and financing of complex real estate projects, including real...  |  Read More

Lang, James
James O. Lang

Shareholder
Greenberg Traurig

Mr. Lang focuses his practice on tax credit incentive programs and related state and federal incentive programs. He...  |  Read More

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