Opportunity Zones

Governors of 18 states have set up qualified opportunity zones on April 19, 2018 where new investment can be eligible for preferential tax treatment. An opportunity zone is an economically distressed area. The Federal government is trying to direct development dollars to these areas and create jobs. It is estimated that these areas will attract 6 trillion dollars from investors. Why would investors want to do this? They get to defer any capital gains even short term gains if they reinvest their capital gains in an opportunity zone within 180 days. The process is somewhat similar to like kind exchanges except that you don't have to reinvest basis and you don't need an escrow agent. It is a temporary deferral. You have to recognize the capital gains on the earlier of the disposal of the opportunity zone investment or 12/31/2026. If you hold the investment for 5 years,  you get to exclude 10% of the deferred capital gains from tax. Holding for 7 years gives you a 15% exclusion. The investment in the opportunity zone also grows tax free like a Roth if you hold it for 10 years. The list of approved opportunity zones can be found at Opportunity Zones Resources and will be continually updated.