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1. How Does Someone Invest in an Opportunity Zone?

Those interested in investing in an Opportunity Zone must invest their funds through “Opportunity Funds,” which are currently being formed to permit investment in projects located in Opportunity Zones. Individuals may also form, fund, and manage an Opportunity Fund using the Department of Treasury's “self-certification” process. If you are interested in taking advantage of the Opportunity Zone program, we highly recommend consulting your tax advisor.

2. How Does the Tax Incentive Work?

• Temporary tax deferral of eligible gain: Investors may defer capital gains on income reinvested into Opportunity Funds. The deferred gain must be recognized when the investor exits the fund or on December 31, 2026.
• Step-Up in basis. If the investor remains within an Opportunity Fund for at least five years, their tax liabilities related to the original capital gains are reduced by 10 percent. If the investment is held in an Opportunity Fund for seven years, this increases by an additional 5 percent, meaning that investors can reduce capital gains liability by 15 percent total.
• Permanent exclusion of fund gains. If an investor keeps the investment in an Opportunity Fund for ten years, any gains from the Opportunity Fund are exempt from taxation.

3. How is an Opportunity Zone Tract Chosen?

The Treasury Department permitted the governor of each state to nominate 25 percent of his or her state’s low-income census tracts as an Opportunity Zone. The Treasury Department certified Governor Baker’s nominations and designated 138 Opportunity Zone tracts in Massachusetts, two of which are in North Attleborough.

4. What Assets are Eligible for Investment?

The policy allows for investment in operating businesses, equipment, and real property. Federal Treasury regulations provide additional detail about qualifying investments, however, generally:

• Opportunity Funds may generally hold an interest in real estate located in Opportunity Zones (either directly or through business entities) and develop real estate properties.
• Opportunity Funds may generally invest in for-profit entities located in Opportunity Zones (for example, start-up technology companies in business accelerators or incubators).
• Investments must meet certain “substantial improvement” requirements the details of which are set forth in the Federal Treasury Regulations.

5. What is an Opportunity Zone?

Opportunity Zones are bipartisan provisions of the Tax Cuts and Jobs Act of 2017. An Opportunity Zone is a designated geographic area in which individuals can gain favorable tax treatment on their capital gains. The goal of the Opportunity Zones provision is to incentivize investors to redeploy and invest capital into low-income communities.