Treasury and IRS announce designation of Opportunity Zones for 18 States

by Dickinson Wright

Dickinson Wright

The Tax Cut and Jobs Act of 2017 (TCJA) established a new economic development incentive, known as an “Opportunity Zone”. An Opportunity Zone is designed to incentivize long-term capital investments in designated low-income communities by providing investors with a deferral from recognizing federal capital gains tax and, in some circumstances, entirely exempting the gain derived from an investment in designated Opportunity Zones.

Each state was allowed to nominate up to 25% of its low-income, high poverty census tracts to the U.S. Department of the Treasury for designation as a Qualified Opportunity Zone. The deadline for each state to make such submissions was March 21, 2018, unless a state requested a 30-day extension.

On April 9, 2018, the U.S. Department of the Treasury and the IRS designated Qualified Opportunity Zones in each state which submitted its nominations by the March 21st deadline. Those jurisdictions include American Samoa; Arizona; California; Colorado; Georgia; Idaho; Kentucky; Michigan; Mississippi; Nebraska; New Jersey; Oklahoma; Puerto Rico; South Carolina; South Dakota; Vermont; Virgin Islands; and Wisconsin.

For a map and listing of all designated Qualified Opportunity Zones, see the Opportunity Zones Resources page established by the U.S. Department of Treasury Community Development Financial Institutions Fund at the following link (which will be updated as designations of Opportunity Zones are made in the remaining states):

Opportunity Zone Incentives

The Opportunity Zone tax incentive established by the TCJA is the first new community development tax incentive enacted since the Clinton Administration. The program is designed to drive long-term capital investment to designated low-income communities and uses tax incentives to encourage private investment in impact funds. Investors are eligible to receive certain tax benefits on unrealized capital gains reinvested in Opportunity Zones through pooled Opportunity Funds.

The program uses low-income census tracts as determined under Section 45D(e) of the Internal Revenue Code of 1986, as amended, as the basis for determining census tracts eligible for an Opportunity Zone designation. This census tract eligibility criteria mirrors the low-income tract criteria for the federal New Market Tax Credit program with an important exception. Unlike the New Market Tax Credit Program, where all low-income census tracts were universally eligible, each state governor is allowed to nominate up to 25% of its eligible census tracts. For example, in the State of Michigan, there are 1,152 eligible census tracts. Therefore, the maximum of 25%, or 288, of these census tracts were allowed to be designated as a Qualified Opportunity Zone. The Qualified Opportunity Zone designation is for 10 years.

Section 1400Z-2 of the Internal Revenue Code allows the temporary deferral of inclusion in gross income for certain gains realized to the extent that corresponding amounts are timely invested in a Qualified Opportunity Fund. These tax incentives include:

  • Investors can defer tax on all prior capital gains reinvested in a Qualified Opportunity Fund until the earlier of the date on which the Opportunity Zone investment is disposed or December 31, 2026.
  • For capital gains reinvested in an Opportunity Fund, the basis is increased by 10% if the investment in the Opportunity Fund is held by the taxpayer for at least five years and by an additional 5% if held for at least seven years, thereby excluding up to 15% of the original gain from taxation.
  • If the investor holds the investment in the Qualified Opportunity Fund for at least ten years, the investor would be eligible for an increase in its basis equal to the fair market value of the investment on the date that it is sold. This means investors who hold up to 10 years would face no capital gains on their Opportunity Zone investments.

The Opportunity Zone incentive may be combined with other federal economic development incentives such as New Market Tax Credits, Low Income Housing Tax Credits, and historic rehabilitation tax credits.

Opportunity Funds

A Qualified Opportunity Fund is a new class of investment vehicle organized as a corporation or partnership that specializes in aggregating private capital and investing at least 90% of the fund assets in Qualified Opportunity Zone Property. Qualified Opportunity Zone Property includes any qualified opportunity zone stock, any qualified opportunity zone partnership interest and any qualified opportunity zone business property.

Treasury and the IRS plan to issue further guidance on Qualified Opportunity Funds but it is expected that an Opportunity Fund will be available to be used as a primary investment in a wide range of commercial or residential development in Qualified Opportunity Zones.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Dickinson Wright | Attorney Advertising

Written by:

Dickinson Wright

Dickinson Wright on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.