Allegheny County | Opportunity Zones

What are Qualified Opportunity Zones?

Opportunity Zones are a new economic development tool designed to spur economic development and job creation in distressed communities. They were added to the Tax Cuts and Jobs Act on December 22, 2017.

Qualified Opportunity Zones are economically-distressed communities where new investments, under certain conditions, may be eligible for preferential tax treatment. Opportunity Zones are designated as such by the governor or chief executive of a given state, district, or territory. All 50 states, the District of Columbia, and U.S. territories are eligible to designate Opportunity Zones.

what are qualified opportunity funds?

Qualified Opportunity Funds are Treasury-certified investment vehicles, that deploy capital into Opportunity Zones. Opportunity Funds are required to hold at least 90 percent of their assets in an Opportunity Zone, or face penalty for each month it fails to meet the investment requirement. The penalty equals the amount of the investment shortfall, multiplied by the underpayment rate as defined in Section 6621(a)(2) of the Internal Revenue Code.

how do qualified opportunity zones work?

Opportunity Zones are designed to spur economic development by providing tax benefits to investors. For an investor to realize the tax benefits of investing in Opportunity Zones, an investor's capital gains must be invested in a Qualified Opportunity Fund with 180 days of the sale or exchange that generated the gains. Investors are then eligible to defer the tax on their capital gains until the earlier of: the date the Opportunity Fund investment is sold or December 31, 2026.

Investors can defer tax on any prior gains invested in a Qualified Opportunity Fund until the earlier of the date on which the investment in a Qualified Opportunity Fund is sold or exchanged, or December 31, 2026. The capital gains invested in a Qualified Opportunity Fund are eligible for partial tax forgiveness if the investment is held in a Qualified Opportunity Fund for at least 5 years. After 5 years, only 90 percent of the original gain is taxed. If the investment is held for 7 years, only 85 percent of the original gain is taxed. If an investment in a Qualified Opportunity Fund is held for 10 years, any tax on the appreciation of that investment is forgiven.