Why Opportunity Zones and what should you know?

As part of the Tax Cuts and Jobs Act passed in December of 2017, Congress created the new Opportunity Zone tax benefit, which provides federal tax incentives for investors to invest long-term capital in low-income communities (in assets such as tech startups and real estate) throughout the United States. Investors may defer federal tax payments on realized capital gains through 2026 by reinvesting those capital gains into certified Opportunity Funds, which must maintain investments in Opportunity Zones.  Seven Peaks is closely involved at the State and Federal levels and is actively exploring the creation of an Opportunity Zone fund that could invest in tech startups and other assets across the Pacific Northwest.

The legislation introducing the new tax benefit for investing in low-income communities includes some details on what areas qualify, what general types of investment qualify and what some of the tax the benefits are.  However, many questions remain about much of the program’s eventual implementation, including what the criteria will be for certifying Opportunity Funds, what level of oversight the investments will have to ensure benefit to low-income communities, what capital gains are included when considering the step-up in basis (step-up on the basis of the rolled-over investment with deferred capital gains or step-up on the investment and capital gains resulting from the Opportunity Fund investment), and whether there will be guidelines for the types of investments or asset classes allowed. Many of these questions will hopefully be answered in the next 1-2 months by pending rules and regulations published by the U.S. Department of the Treasury and the Internal Revenue Service.

Despite the number of questions surrounding the implementation of Opportunity Zones, it is clear from the legislation that the tax benefits increase the longer the investments remain invested in the Opportunity Funds, with benefits increasing for investments held for five, seven, and ten years. Seven Peaks will continue to follow developments related to Opportunity Zones and any rules and regulations published by the U.S. Treasury and the IRS, and Seven Peaks Ventures will announce our specific plans as soon as we can.

Please stay tuned for our continued dialogue and resources…

VCs Await Regulatory Clarity on Opportunity Zones – The latest tactic to draw capital to the heartland Venture Beat

Five Questions with Ross Baird Access Ventures

Opportunity Zones – The Map
An Unlikely Group of Billionaires and Politicians Has Created the Most Unbelievable Tax Break Ever Forbes

New Hotel or Affordable Housing? Race is on to define “Opportunity Zones” Wall Street Journal
Fundrise Opportunity Zones Fundrise
Opportunity Zones: A New Way to Tackle Economic Equality Challenges in America Pathstone