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Taxation

Qualified Opportunity Zones

When the U.S. Congress created a new “Qualified Opportunity Zone” (QOZ) program enabling investors to defer and potentially eliminate taxable gain by investing in qualifying low-income communities, Vorys created a multi-disciplinary team to assist clients in navigating the legal and regulatory framework of the QOZ program.

Under the QOZ program, a taxpayer who recognizes gain on the sale of property (including investment assets, such as stock or other security interests, and business assets) can defer and partially eliminate such gain, as well as additional future gain, by investing the sale proceeds in a “Qualified Opportunity Fund.” A Qualified Opportunity Fund is a partnership or corporation certified by the U.S. Treasury Department and formed for the purpose of making investments in businesses located in low-income communities designated as “Qualified Opportunity Zones.”

In addition to providing potential tax benefits to taxpayers, the QOZ program creates another potential source of capital for new projects located in QOZs. 

While there are many requirements and limitations that apply to QOZ investments, at this point there remain many questions about how the QOZ rules will be applied.  Additional guidance from the Treasury Department is necessary in order to fully implement this program, and is expected soon.  Vorys continues to monitor the QOZ program and can assist in assessing the viability of a potential QOZ investment, and in evaluating potential structures in light of currently available guidance.  Further information on the QOZ program is available below in Insights.

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