Qualified Opportunity Zones
Packard has been a client of HLB Gross Collins for 33 years, through the tough years and the growth years. They have been a loyal and trusted advisor to us for everything from Audited financials to our recent transition to 100% ESOP, we could not have completed this transaction without their expertise. The firm has grown with us over these years and we look forward to trusting them for all our accounting and tax needs for many years to come. I don’t know how to say enough about how I trust the advisors and friends I have a HLB Gross Collins.
Susan Kirkland, President
Packard, Inc.
OVERVIEW
The Tax Cuts and Jobs Act introduced IRC §1400Z-2 Special Rules for Capital Gains Invested in Opportunity
Zones. This section allows a taxpayer to elect to defer or
exclude from gross income gain on the sale or exchange of any property to an unrelated
party in the tax year of the sale or exchange if the gain is reinvested in
a qualified opportunity zone ("QOZ") within 180 days
of the sale or exchange. The amount of gain that can be deferred or excluded is
equal to the amount of gain invested in the QOZ.
Qualified Opportunity
Zones are nominated as such by the chief executive officer of a state, and
certified by the Secretary of Treasury. A "state" includes any U.S. possession
and a "chief executive officer" generally refers to a state's governor. The
designation as a QOZ remains in effect for 10 years beginning on the date of
designation.
- For a list of all designated Qualified Opportunity Zones,click here.
- For a map of all designated Qualified Opportunity Zones,click here.
DEFERRAL/EXCLUSION OF GAIN
The election allows
the gain to be deferred until:
- The investment is sold
or exchanged, or
- December 31, 2026,
whichever is earlier
When the taxpayer
reinvests in a QOZ property, the basis in the investment is initially zero.
However, basis can be increased by holding onto the investment for the
following periods of time.
- 5 years - basis is
increased by 10% of the gain originally deferred.
- 7 years - basis is
increased by 15% of the gain originally deferred.
- 10 years - basis is
increased to be equal to the FMV of such investment on the date it is sold.
There are some complications with this adjustment because of the sunset date
mentioned above.
DEFINITIONS
Qualified Opportunity Fund - Any investment vehicle which is organized as a corporation
or a partnership for the purpose of investing in QOZ property that holds at
least 90% of its assets in QOZ property.
Qualified Opportunity Zone Property - Includes property which is:
- QOZ Stock
- QOZ Partnership
Interest
- QOZ Business Property
For additional information, please contact your
tax advisor at HLB Gross Collins, P.C.
As a former principal at HLB Gross Collins, I am pleased to continue to be able to work with the firm’s professionals as the Chief Financial Officer of a long-time client of the firm. Serving a complex operation such as Mirasco’s is challenging, and Michael Bohling and Iliana Malinov meet that challenge by constantly thinking about our business and being in regular contact with me. Along with the managers, Adil Amou and Michelle Jenkins, they keep us current on reporting and tax developments. Our international scope requires advisors who are constantly thinking about all the implications of our transactions, and the HLB team does a great job bringing us ideas and responding to our questions.
Rick Hamilton EVP & CFO
MIRASCO Inc.
With international dealings, not all CPA firms are created equal. Frustrated with complicated and inaccurate advise by our previous CPA, we were referred to HLB Gross Collins. HLB has been there to get to know who we are and to help us grow along the way by making suggestions and referrals that work for our business. No question is too small or large, all receive respectful and timely replies. The personal, reliable and professional services that Iliana and HLB staff have provided has been beyond measure, in the more than 11 years since we made the change.
Marc Lacourly
Prime Industries Inc.