Opportunity Zones and Opportunity Funds
Client and Industry Challenges
When the Tax Cuts and Jobs Act was signed into law in late December 2017, an important new investment tool was created, offering significant federal income tax incentives for investors to provide capital to operating businesses and for real estate development – called Opportunity Zones. Specifically, Opportunity Zones are designed to encourage investment of private capital into newly formed investment entities, Opportunity Funds, which will deploy the invested capital into businesses located in and real estate development occurring within certain designated areas throughout the country (approximately 8,700 different population census tracts).
Opportunity Zones offer taxpayers significant federal income tax incentives for investing in Opportunity Funds, including the long-term deferral and partial reduction of gain from the sale of an asset where the gain proceeds are reinvested in an Opportunity Fund. However, the most notable federal income tax incentive is the exclusion of income from taxation on an investor's appreciation of his or her interest in the Opportunity Fund where the investor holds such investment for a certain period of time. The potential investor base for this program is significant - it is estimated that $6 trillion of unrealized capital gain exists in assets eligible for re-investment in this program.
At Snell & Wilmer, we have brought together an interdisciplinary team of attorneys from across all of our offices who have a strong understanding of this complex, but attractive new program. We are currently advising clients on strategies for taking advantage of this new development, including taxpayers with respect to making investments in Opportunity Funds, sponsors with respect to forming and structuring Opportunity Funds, and target companies and property owners located in Opportunity Zones. Additionally, our team will be advising Opportunity Funds with respect to the structuring and deployment of capital in Opportunity Zones and the respective ongoing compliance issues related to this program.
New Markets Tax Credit Experience
Opportunity Zones is a federal program modelled after the federal New Markets Tax Credit (NMTC) program and adopts many of the same rules. Having a legal advisor who understands the limitations and compliance issues with respect to NMTCs is a prerequisite for success in this new area. At Snell & Wilmer, we have an established and robust NMTC practice from a tax, commercial finance and corporate compliance perspective, and we regularly issue written tax opinions in the NMTC area. We also have significant experience with structuring complex transactions from a tax and financing perspective - which is necessary for deployment of capital by an Opportunity Fund. Accordingly, we are well-positioned to represent investors, fund sponsors, lenders, and both businesses and real property owners located in Opportunity Zones.
Clients We Serve
Our Opportunity Zones and Opportunity Funds attorneys serve clients in the areas of: real estate investment and development, mergers and acquisitions, complex lending, community and economic development, tax credit financing, and high-net-worth investing across the United States. We have more than 150 attorneys practicing in our offices in Arizona, California, Colorado, Nevada and Utah in the areas of:
- Real Estate
- Corporate and Securities
- Commercial Finance
- Construction and Zoning
- Infrastructure Development and Project Finance
- Fund Formation and Investment
- Private Client Services
In addition, we serve a broad array of clients, including individuals, families, fiduciaries, publicly traded and closely held businesses, national and regional lenders, nonprofit organizations, and international corporations.
Why Clients Select Us
With more than 450 attorneys in 15 locations throughout the United States and in Mexico, Snell & Wilmer can quickly mobilize cross-disciplinary teams to react to changes in government, law and regulation, as we have in consolidating our practice group for Opportunity Zones and Opportunity Funds. We draw upon the full experience of attorneys in our firm in order to fully benefit our clients.