Opportunity zones were introduced in the 2017 tax reform bill as a means of moving capital into economically distressed areas, incentivized by federal tax benefits. Basically, opportunity zone investors are eligible for three primary economic benefits. First, complete tax deferral on capital gains reinvested in a qualified opportunity fund until Dec. 31, 2026.
Finally, investors who hold the opportunity fund investment for at least 10 years qualify for a complete tax exclusion on capital gains arising from the underlying opportunity fund investment upon its sale provided it is sold by Dec. 31, 2047.
What’s more? Oklahoma is making opportunity zone investments in our state even more lucrative by designating these zones as priority enterprise zones, a state designation under the Oklahoma Enterprise Zone Act that may qualify investments in those areas for additional economic incentives such as two times the amount of investment and new jobs tax credits, sales tax exemptions for certain manufacturers, low-interest loans funded by Enterprise District Loan Funds, and ad valorem tax exemptions for a term of up to six years under the Local Development Act, just to name a few. Investors looking to make the most of the opportunity zone incentives should consider investing in a qualified opportunity fund by that date to qualify for the full 15% tax forgiveness on reinvested capital gains, and be prepared to hold that investment until at least 2030 to eliminate tax on appreciation of the opportunity fund investment.
You should consult with your tax and legal advisers prior to making an investment in a qualified opportunity fund.