Created by the Tax Cuts and Jobs Act of 2017 to spur private investment in small businesses and in commercial and housing projects in low-income areas, the Opportunity Zone Initiative drives private investment to urban and rural low-income communities Investors Those willing to invest capital gains in areas designated as "Qualified Opportunity Zones" are potentially eligible for preferential tax treatment. Under the current law, this tax benefit has lapsed for investing in an Qualified Opportunity Fund going forward. However, taxpayers who held their investments in a Fund at least five years prior to December 31, 2026, will have their basis increased by 10 percent of the original gain invested in the Fund. For investments held for at least seven years, the taxpayer’s basis is increased by an additional five percent of the original gain. As suggested above, to take advantage of this specific benefit, the investment had to be made by December 31, 2021. Additionally, if investors hold their investment in the Qualified Opportunity Fund for at least 10 years, any capital gain realized when disposing their interest in the Fund likely can be excluded from the investors’ taxable income. Funds Qualified Opportunity Funds are self-designated funds designed to invest in Qualified Opportunity Zones. Importantly, the Fund must invest at least 90% of its assets in property that qualifies as Opportunity Zone Property and/or in a company that qualifies as an Opportunity Zone Business. A Fund must ensure that it satisfies the 90% threshold by the "testing date," which is generally both midway and at the end of the Fund’s taxable year. Developers The Opportunity Zone legislation is well-suited for real estate projects. For example, a developer could invest its own capital gains into a Qualified Opportunity Fund and utilize such funds to develop one of its projects within an Opportunity Zone. Alternatively, the developer could raise capital for a project by soliciting from Qualified Opportunity Funds set up by third parties. Developers utilizing Opportunity Zone funding must be cognizant of the numerous deadlines and requirements that are affiliated with Opportunity Zone Projects, including that property utilized in a project must generally be acquired after December 31, 2017 and furthermore the project often needs to be completed within 31 months from receiving funding from a Qualified Opportunity Zone Fund.