Really interesting question. The structure depends a lot on who’s involved and how many parties are in and out of different farms. I’m a personal fan of the GP/LP structure for larger deals and LLC parent, sub for the smaller ones.
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What is the best deal structure for a tribal OZ fund on Native American land?
We are developing hemp farms in tribal Opportunity Zones. What are the best OZ deal structures for those projects?
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Without doing any research, I do not see any special structures for a properly approved Opportunity Zone on tribal land. However, there may be some complexity in the tribal approval process and making sure the tribal law properly addresses the panned development structure. That is more a tribal law matter than a federal tax law matter.
I'm sure if there is an ideal deal structure. That's more of a determination for an attorney to make with you. However, tribal lands generally cannot be sold, so the deal will have to be structured to feature a lease.
Likely you will want to lease the Opportunity Zone property, as purchasing tribal land is likely most difficult. So QOF invests in a Qbiz, which leases the tribal property to conduct business.
Structuring is very fact-specific, but generally you will want the QOF (top-tier fund) to be an LLC taxed as a partnership and the QOZ business (HEMP) to be an LLC taxed as a partnership also. This allows any debt financing to increase some or all of the investors' tax basis, and start-up losses may then be eligible for deduction. Otherwise, there is likely no basis and no tax losses available to the investors. The investor profile, the financing structure and the ultimate exit plan needs to be weighed to fully evaluate.
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