The Opportunity Zones program, established through the Tax Cuts and Jobs Act, aims to spur long-term private sector investments in low-income communities nationwide. Investors in Opportunity Funds established within the designated Qualified Opportunity Zones can take advantage of federal tax benefits in exchange for their contribution to economic growth and investment in distressed communities. Project sponsors can also benefit from lower-cost capital generated by the program.
How it Works
The Opportunity Zones program offers federal tax incentives for investing unrealized gains in Qualified Opportunity Funds, which are investment vehicles created specifically for these purposes. The amount of benefit ultimately recognized depends on the holding period of the investment.
Investors receive a temporary deferral of tax on gains reinvested into Qualified Opportunity Funds.
The reinvestment must be made within 180 days of the sale creating the gain. The period of deferral ends upon the earlier date of the sale of the reinvestment in the Qualified Opportunity Fund or Dec. 31, 2026.
The reduction benefit provides investors a step-up in basis, the amount of which is contingent on the length of time they maintain the investment in the qualifying fund.
If the investment is held for five years, 10 percent of the original gain is eliminated. If it is held for seven years, an additional 5 percent is eliminated. In total, the reduction benefit allows investors to potentially exclude up to 15 percent of the original gain from taxation.
If the investment is held for at least 10 years, the appreciation on the investment is permanently excluded from taxation.
Based on a plain reading of the new law, this only applies to additional appreciation after the investment in the Opportunity Fund is made.
This model assumes a 23.80% federal tax rate, 5.00% growth rate and 10.00% annual investment return. This model is for illustration purposes only, and contains certain financial assumptions as to the possible future results that are inherently uncertain and subjective. We make no representation or warranty as to the attainability of those assumptions or whether future results will occur as illustrated.
The State of Texas has established state and local economic development programs that provide support and incentives for companies that invest and expand their operations and workforces in Texas communities.
South Park Industrial Park is a property we own that can be rolled up into an Opportunity Zone.
We are planning to incorporate Santa Ana Industrial Park and San Fernando to our Opportunity Zone.
SOUTH PARK 2 - Closed in December 2019
BALL STREET 3 - Closed in February 2020
Benefits dependent on the number of
years the investment is held
Deferred payment of existing gains until the investment is sold or exchange
5 - 7 YEARS
Benefits listed above plus 10% of tax on existing gain is cancelled
7 - 10 YEARS
Deferred payment of existing gains until 12/31/26 or the date that the investment is sold or exchanged (whichever comes first) plus 15% of tax on existing gain is cancelled
Benefits of 7-10 year investment plus investors pay no gains tax on the investment (investments are exempt from any gains beyond those which were previously deferred)
Office 210 490 9991
750 E. Mulberry, Suite 500
San Antonio. TX 78212