You can form a QOF as an LLC in any state.
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How can I create a Qualified Opportunity Fund for my development if I am located in a state that doesn’t conform to the OZ program?
I am building a storage facility in California. What is the best strategy for me to take advantage of the Opportunity Zone program? Does California have other tax incentives that I can use in an Opportunity Zone?
Answers
The fact that you or your project is in a state that doesn't conform to the opportunity zone (OZ) program does not prevent you from obtaining federal benefits. You would form the qualified opportunity fund (QOF) in the same manner that you would set up any other QOF, which can be as simple as an LLC (i) in which you and one other member invest (even if your spouse and even if it's for just a 1% interest) and (ii) that has a statement in its organization documents saying that it was formed for the purpose of the investing in qualified opportunity zone property and describing its qualified opportunity zone business, i.e., building and operating a storage facility. California (or the municipality in which the project is located) may have other incentives, but they probably won't be tied to whether the project is in an OZ.
California state taxes do not recognize OP Zone tax deferral, but the federal government does. California in general does not treat capital gains different from ordinary income, so that is why OP Zone has no impact on CA taxes. But you can still get the federal tax benefits in a CA Op Zone. Hope that helps!
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