Part of the Tax Cuts and Jobs Act of 2017, the Opportunity Zones program offers tax incentives meant to encourage investors to contribute to the development of low-income areas across the country. Florida’s Opportunity Zones provide an opportunity for developers to buy and invest in properties in up and coming areas.
However, until recently, developers were slow to take advantage of Opportunity Zone benefits. Changes put forward by the IRS and the United States Treasury may put developers in a better position to start projects in Florida’s Opportunity Zones.
What kind of benefits do Opportunity Zone investors get?
The primary benefit of investing in an Opportunity zone is the ability to defer, or possibly forego, capital gains taxes on contributions to Qualified Opportunity Funds.
How Opportunity Zone businesses qualify for tax benefits
Under the new proposed rules, companies can be eligible for Opportunity Zone tax breaks in two ways:
- If at least 50% of their gross income comes from a trade or business within an Opportunity Zone, OR
- If at least 50% of the wages or hours worked for the company come from within the zone
The second method, which comes from the new rules, is good news for start-ups and other businesses. They can reap the benefits of the Opportunity Zone program even if their business spans across the state or the country.
As the rules surrounding the program develop, new benefits as well as new bureaucratic hoops may arise. For businesses and developers looking to take advantage of the Opportunity Zone program, consulting with a commercial real estate attorney can help clarify the best way to proceed.