This should work fine. Take a loan from the regional center and use a QOF to make the equity investments.
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How can I combine an EB-5 project with the OZ incentive?
One of my EB-5 developments is located in an Opportunity Zone. How can I benefit from both programs?
Answers
You simply need to meet the requirements of both programs independently. You can qualify for both so long as you meet all applicable standards.
There is no tax benefit for the EB-5 side being in an OZ. But you can structure to pair EB-5 money with OZ capital gain rollover money into an OZ fund.
They are mutually exclusive requirements. A hotel development in an OZ could easily qualify for both.
The good news is that the EB-5 program and the Opportunity Zone tax incentives are very compatible and have many things in common. Both programs were designed to stimulate economic development in under-served areas. The concept of an EB-5 Targeted Employment Area (TEA) is analogous to that of an Opportunity Zone. Also, both programs offer specialized benefits, beyond those of traditional investments, that may result in a lower overall cost of capital for developers. In the EB-5 arena, investors are primarily focused on the immigration benefit, and therefore have historically had lower expectations for their investment’s yield. In the Qualified Opportunity Zone program, investors seek tax deferral and tax exclusion in addition to a return on investment. Both the EB-5 program and the Qualified Opportunity Zone program attract investors who are likely to be patient as both programs incentive long-term investment. Step one is to make sure the project is in a TEA and a Qualified Opportunity Zone. Step two is to determine if the project will create jobs to cover the desire EB-5 funds raise. Step three is to form a Qualified Opportunity Fund or seek investment from a third-party Qualified Opportunity fund. Step four is to form an NCE associated with an approved regional center in the geographic area covering the project.
Opportunity zone capital through the realization and deferral of capital gains into an Opportunity Zone Fund, while source of capital to fund an EB-5 investment can be any source of capital. If the EB-5 is structured as an equity investment, then an investment structure could be created for long-term investors to invest in the project alongside the Opportunity Aone Fund. Of course, the investment would have to be into a qualifying Opportunity Zone investment to preserve the tax benefits of the Opportunity Zone program.
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