What is an Opportunity Zone? What Is Its Mission?

Before going deeper in to the nature of The opportunity Zone programs, let us first see what an opportunity zone is in the first place. As it names implies, the opportunity zone is a community which suffers greatly from economic deprivation. So, in order to alleviate this deprivation, the federal government of US has taken some measures to open windows of opportunities so that the community can economically flourish. 

Under such zone, the federal government will allow certain investments that would bring economic prosperity to the deprived area. Most importantly, the investments will become subject to favour or partiality in terms of tax treatment by the federal government of United States. 

The TCJA sees the opportunity zone program as an economic enhancement method that will help the under privileged localities of United States by opening windows for new job opportunities and economic growth. 

How does a certain community qualify for an opportunity zone?

The communities or areas that are designated by state and if their selection is approved by the US national treasury and its bureau Internal Revenue Service, only those can become eligible for becoming an opportunity zone. Once they quality, then only the investors can enjoy the benefit of tax partiality.

The creation and sustenance of the Opportunity Zone Program

The tax cuts and Jobs acts included the opportunity zone programs in the tax code on 22^nd December 2017. This means that these programs are a recent addition in the existing tax code and since the first set that was incorporated in 18 countries of United States in 19^th April 2018, they started to gain popularity. Since then, under the opportunity zone program, around 50 states of America are nominated including the five US territories and the Columbian region.

How do the Opportunity Zone Program positively contribute to the economic upsurge of distressed communities of United States?

The TCJA specifically designed this program to foster economic growth in the neglected localities of the country by allows the investors to benefit from preferential tax treatment. The investors enjoys tax benefits on two platforms and they are:

• On any previous capital gains that are financed in Qualified Opportunity Fund of the QOF, the taxpayer investors can postpone the paying of the taxes. The investors can be delay taxes until the time comes when their investment in Qualified Opportunity Fund is sold or traded. So, as the time of QOF investment withholding increases, the percentage omission of the deferred gain increases. For instance, if the investment in QOF is held for more than 5 years, then there will be 10% omission from the deferred gain. And if the time period exceeds further two years, that is 7 years then the percentage of omission increase 5% further.
• Secondly, if the investors withholds his financing in the Qualified Opportunity Fund for more than 10 years, then he becomes qualified to get a rise in his existing investment in QOF. In this way, on the date of his selling or trading of his investment, his invested money will equal to the unbiased market value.

Is living in an opportunity Zone a prerequisite to enjoy the potential tax benefits of the Opportunity Zone program?

Well, it is certainly not a priority that you need to specifically become an inhabitant of an opportunity zone locality, work or start your own business in order to enjoy the benefits of tax partiality or tax deferment that the program offers. What you are required to do is that just finance an acknowledged gain in the Qualified Opportunity Fund and nominate your investment so that you can enjoy the perks of tax postponement on it till the time you decide to sell or exchange your investment.

What procedure a corporation or a partnership business needs to undergo in order to gain the certificate of Qualified Opportunity Fund?

To gain approval of becoming a QOF, a Limited liability corporation or partnership business needs to self-certify. They needs to fill a form that is released in the summer of 2018 and then attach this completely filled form to their federal income tax refund form. Keep in mind that both the attached form and the refund must be filled within the time constraints along with taking in to consideration the extension lead.

 In this respect, the Opportunity Zone Programs offered by TCJA will allow the distressed US communities to gain economic growth as the investors will get to benefit from the tax deferments.