Qualified Opportunity Zones and Arizona - Arizona REALTOR® Voice

This past September, U.S. Treasury Secretary Steve Mnuchin predicted that newly designated “Opportunity Zones” created by the Tax Cut and Jobs Act could attract billions of investment dollars.¹

Arizona now has 144 qualified opportunity zones, including 61 in Maricopa County and 28 in Pima County.²

“The basic premise behind the Opportunity Zones initiative was to offer incentives in the form of deferred and reduced taxes on capital gains to attract private capital for investment in low-income urban, suburban and rural areas of the country.” – Beth Mattson-Teig, NREI

During Marcus & Millichap’s webinar on November 27, 2018, presenters John Chang, Michael D’Onofrio, John Sebree and Kevin Wilson had an insightful discussion about Opportunity Zones.

Here are some highlights:

Opportunity Zones are designed to be scalable and do not have a statutory cap
Capital gains invested into Opportunity Funds are mostly deferred, with just 10 to 15 percent of the taxable amount being forgiven
Gains may be invested into a Qualified Opportunity Fund (QOF) to buy real estate & make improvements
Gains must be invested into that property within six months of putting it into the QOF
When the QOF buys real estate, it’s called the “direct approach”
Money is invested into the QOF first, then the fund buys the property
The QOF can be an LLC, if taxed as a partnership or corporation
QOFs self-certify by filing with the IRS
QOFs must buy real estate in an Opportunity Zone (based on census tracts)
Rules are still being written and are very fluid

For additional guidance, contact John Chang at Marcus & Millichap.

Sources:
¹Mnuchin predicts $100B in cap investment from new opportunity zones – The Hill (Sep. 28, 2018)
²Qualified Opportunity Zones in Arizona – IRS Bulletin, see pgs. 13-17 (July 9, 2018)

Related Articles:
‘Opportunity Fund’ Managers Favor Urban Areas, Commercial Real Estate – NREI (Dec. 3, 2018)
Opportunity Zone Designation Fueling Demand in North Phoenix – Phoenix Business Journal (Dec. 3, 2018)*
Tax Reform Opens New Opportunities for Commercial Real Estate – REALTOR® Magazine (Nov. 2, 2018)
Tax Breaks Open Up ‘Opportunity Zones’ for Investors – REALTOR® Magazine (Oct. 22, 2018)
An Increasing Number of New Real Estate Funds Target Opportunity Zones – NREI (Oct. 10, 2018)