Through a nomination and designation process, areas that meet certain criteria as set forth in the new tax reform, have obtained this status. In an effort to attract private funding for projects in these areas, the IRS provides benefits to long term investment.  

 

Created by the Investing in Opportunity Act, a part of the Tax Cuts and Jobs Act of 2017, this program operates with less restrictions than previous, similar programs. Since it does not operate on a tax credit basis, the program allows funds, such as this one, to work without a limitation on the number of benefits issued. There is also the freedom of the fund being able to invest in a wide variety of impact driven development, and with no limitation on the amount of deployed. 

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All 50 states, the District of Columbia, and 5 U.S. possessions, contain Opportunity Zones, in addition to Puerto Rico. Composed of a wide variety of  communities, there are currently over 8,700 designated zones with a population of 31 million plus individuals. These zones are intended to develop or re-develop economically transitioning areas, the areas that qualify for the program are designated by census tract.

 

Capital gain investment is reduced in stages. A 5 year investment equals a 10% reduction in capital gains, 7 years equals 15% reduction, 10 years equals 15% reduction in cap gains and exemption from all income derived from the original invested capital.