There’s been a lot of talk about Opportunity Zones coming from the Colorado Office of Economic Development, however final interpretations around rules are still hanging out there. Opportunity Zones, which were enacted as part of the 2017 tax reform package are aimed at stimulating growth in areas that didn’t benefit as greatly from the most recent economic recovery. The main goal of the Investment in Opportunity Act is to encourage investment in economically distressed areas. Qualifying purchases/developments include ground-up development, new businesses, relocating businesses or a large expansion of an existing business.
Core benefits of either developing or moving a business to an Opportunity Zone include tax deferment on capital gains which are rolled into an Opportunity Fund. The Opportunity Fund is used as an intermediary either formed as a corporation or partnership with the purpose of using 90% or more of the funds for investment in an Opportunity Zone. The 90% requirement is tested twice per year and is subject to strict penalties if not met. Benefits of taking this action include no up-front tax bill on the rolled over gains, reduction of capital gain tax on long term holdings (5 yrs of holding increases rolled over capital gains basis by 10%, 7 yrs adds another 5% for a total of 15%). Additionally and possibly the most exciting aspect is the fact that investors in Opportunity Funds are allowed to defer their original tax bill through December 31st, 2026 and funds held for over 10 years are not subject to capital gains tax!
A map of all Colorado Opportunity Zone areas can be found here: https://choosecolorado.com/opportunity-zones/ For more information on how to make the most of this opportunity please feel free to reach out to firstname.lastname@example.org anytime.