The federal opportunity zones program offers tax benefits to entrepreneurs and investors who direct their efforts and funding to designated areas—qualified opportunity zones (QOZs)—that could benefit from an economic boost. It’s a unique concept with significant potential for investors and the communities the program aims to revitalize. In Indiana, Indianapolis opportunity zones and others throughout the state present investment options with benefits for both investors and the local community.
What Investors Should Know about Indiana and Indianapolis Opportunity Zones
QOZ investments can result in deferral of capital gains taxes, a step-up in basis on reinvested gains, and exclusion from tax on gains realized within the funds in some cases. The rules and tax implications regarding opportunity zone investments are somewhat complex, and anyone considering an investment in a qualified opportunity zone or qualified opportunity fund (QOF) in Indianapolis or elsewhere in Indiana should consult with a knowledgeable Indiana QOZ lawyer who understands the fine points of these investments and the related tax and legal considerations.
What Is a QOZ? What Is a QOF?
Opportunity zones were created by the Tax Cuts and Jobs Act of 2017 with the intention of incentivizing investment in economically distressed geographic areas. States were asked to nominate statistically low-income census tracts for inclusion. The US Department of the Treasury then certified the tracts that met program requirements as qualified opportunity zones.
A qualified opportunity fund is an investment vehicle that is created as a partnership or corporation for the purpose of investing in QOZ properties. The organization can also be a limited liability company (LLC) that elects federal tax treatment as a partnership or corporation.
Because the program was designed to bring employment and economic development to low-income communities, at least half of the gross income of a QOZ business must be derived from activities that occur within a qualified zone.
Capital gains and qualified gains under 26 US Code § 1231 that are invested in a QOF within 180 days of realizing the gain can be deferred. Some invested gains become eligible for a step-up in basis, and additional gains realized within the QOF can be excluded from federal tax liability under some circumstances. The exact tax benefits and allowances are determined, in part, by the length of time the investment is held.
Indiana Opportunity Zones
Opportunity zones have been designated in all 50 states. In Indiana, Governor Eric J. Holcomb nominated 156 census tracts throughout the state. All were certified by the Department of the Treasury and designated as qualified Indiana opportunity zones.
The Opportunity Investment Consortium of Indiana facilitates connections and collaboration between opportunity zone investors and community stakeholders. The Consortium’s website offers resources for businesses and potential investors as well as additional details about Indiana opportunity zones and opportunity funds. The Indiana Economic Development Corporation (EIDC) also provides resources for individuals and businesses that are interested in the QOZ program.
Indianapolis Opportunity Zones
Marion County has 36 designated QOZs. Nearby Madison, Boone, Hendricks, Morgan, Johnson, and Shelby counties each have at least one qualified opportunity zone as well. According to Indy Chamber, opportunity zones in Indianapolis have been designated in nine specific areas of the city:
- Central Business District;
- White River;
- Near North;
- Near East;
- Far East;
- International Marketplace;
- Airport; and
Indy Chamber has additional information regarding the potential types of investments and opportunities in each Indianapolis QOZ, from retail and mixed use properties to canal and river site development to single or multi-family housing to brownfield development and quality of life improvements.
Discuss Your QOZ Investment with an Indianapolis, Indiana Lawyer
If you currently hold or are considering an investment in Indiana or Indianapolis opportunity zones, it is vital that you consult with an Indiana QOZ lawyer—someone with extensive knowledge of the QOZ program and strong experience in the related areas such as federal and Indiana tax law, business law, and real estate issues. From investment planning to reporting and everything in between, you will find the reliable counsel you need at Camden & Meridew, P.C. Start a conversation about QOZ and QOF opportunities today by calling 317-770-0000 or completing the firm’s online contact form.