The Tax Cuts and Jobs Act (TCJA) introduced Qualified Opportunity Zones (QO Zones) to encourage investment in low-income areas by offering investors federal tax benefits. Specifically, the program allows a taxpayer to reinvest gains from the sale of an asset into a Qualified Opportunity Fund (QO Fund) within 180 days, which temporarily defers and possibly reduces tax from the sale transaction. Additionally, the program allows investors to permanently exclude the appreciation on their original investment in the QO Fund if a certain holding period is achieved.
Recently, there have been two important developments surrounding the program — promising clarification for investors and a potential tax credit for those investing in QO Funds that invest in Ohio.
Proposed QO Zone Regulations Under Review
On September 12, 2018, the IRS sent the Office of Information and Regulatory Affairs (OIRA) draft regulations to clarify numerous areas of the program. The guidance is currently under review, and we expect it to fall under the expedited 10-business-day review available for guidance related to the TCJA.
Potential Ohio Tax Credit for Investing in QO Funds
A bill also has been introduced in the Ohio House of Representatives that would allow taxpayers who invest at least $250,000 during a taxable year in a QO Fund investing in Ohio to earn a nonrefundable tax credit equal to 10% of the investment.
We will continue to monitor these areas for additional information as it becomes available.
Please contact a member of your service team, or contact Adam Hill at email@example.com or Angel Rice at firstname.lastname@example.org for further discussion.
Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.