For tangible personal property, it should be fine as long as you're using it in the QOZ, although it might get a bit fuzzy if it's mobile property. For real property, you need to either develop the property new or substantially improve it.
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How can a leased property qualify as an OZ business?
I have been leasing a commercial property in an OZ since November of 2017 and half of my business is directly involved with the local services in the OZ community. What do I need to do to fulfill the leasing requirement?
Answers
Existing businesses already within a zone are challenged in qualifying. This would require a more detailed response outside the brief responses I normally provide here.
While a leased building in a OZ census tract can qualify a business owner for OZ benefits, unfortunately unless you rolled a qualified gain into a OZ fund and either started or purchased a business after 2017, you will not meet the tests. It may be possible to generate a tax gain from another asset and then sell or contribute your business to the QOF and meet the OZ tests in whole or in part. But you need to watch the "related party" rules as well as the "original use" test for your business assets. There are some ways to structure this if you plan on making more investments into the business.
Merely triple-net leasing property doesn't work and the property needs to be acquired after Dec. 31, 2017, but I'm not sure how those items apply to your situation.
Based on the most recent round of IRS regulations, "leased tangible property must be acquired under a lease entered into after December 31, 2017" in order to be considered Qualified Opportunity Zone Business Property.
If your business in the lease of property (i.e. a building), as long as it is not a triple-net lease, it will qualify if all other tests are met, including that at least 70% of the assets are Qualified Opportunity Zone Business Property, which is required to be acquired from unrelated persons after Dec. 31, 2017.
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