What are the qualifications for setting up a Qualified Opportunity Zone business?

Answers

• 

  Brandon Jones

  Winstead

  May 22, 2019

  70% or more of tangible property of the Opportunity Zone business has to be qualified Opportunity Zone property. The business has to generate more than 50% of its gross income from inside a qualified Opportunity Zone. No more than 5% of the businesses assets can be "nonqualified financial property," including cash or cash equivalents unless holding them pursuant of a written plan and the money will be spent within 31 months of receipt by the Opportunity Zone business. Lastly, the Opportunity Zone business cannot be engaged in a "sin" business.

• 

  Debbie Klis

  Rimon P.C.

  May 22, 2019

  Regarding the qualifications for setting up a qualified Opportunity Zone business (QOZB), the entity must be a partnership or corporation for federal income tax purposes (not a disregarded entity) that satisfies a variety of tests including: at least 70% of the tangible property it owns or leases is QOZBP; at least 50% of its gross income is from the active conduct of a trade or business in a QOZ; at least 40% of its intangible property is used in the active conduct of its business; no more than 5% of its assets are nonqualified financial property; and it is not a “sin business.” A QOZB may hold reasonable working capital unlike a Qualified Opportunity Fund (QOF). Thus, most QOFs are likely to have a two-tier structure. Investors invest in a QOF that invests in an entity that is a QOZB.

• 

  Peter McNeil

  Comprehensive Financial Solutions and Tax

  May 22, 2019

  An OZ business only needs to have 70% of its assets be qualified OZ assets. To be a qualified Opportunity Zone business, the business must also pass one of the following tests. One, 50% of revenues must generated from or inside the Opportunity Zone or 50% of revenues are generated to the Opportunity Zone. Two, 50% of employee hours or wages paid are in the Opportunity Zone. Three, 50% of management responsible for generating revenue must be inside the Opportunity Zone.

• 

  Matthew Rappaport

  Falcon Rappaport & Berkman

  May 22, 2019

  In a nutshell: One, the QOZ business must be a tax corporation or a tax partnership. Two, equity in a QOZB must be at original issue, solely in exchange for cash. Three, the QOZB must be organized for the sole purpose of serving as a QOZB. Four, at least 70% of the QOZB's tangible property must be QOZBP. Five, at least 50% of the QOZB's income must be derived from within the QOZ. Six, the QOZB must conduct an active trade or business under Section 162 that is not a sin business. Seven, 5% or less of the QOZB's aggregate adjusted basis of all property can be non-qualified financial products, subject to a working capital safe harbor. The foregoing is general information and not legal or tax advice.

DISCLAIMER: 

the information found on this website is intended to be general information; it is not legal or financial advice. Specific legal or financial advice can only be given by a licensed professional with full knowledge of all the facts and circumstances of your particular situation. You should seek consultation with legal and financial experts prior to participating in any aspect relating to Opportunity Zones. Posting a question on this website does not create an attorney-client relationship. All questions you post will be available to the public; do not include confidential information in your question.