Qualified Opportunity Zone Consultants

StoneCreek Partners acts as qualified opportunity zone consultants for projects and businesses that can be acquired or developed pursuant to the U.S. Tax Cuts and Jobs Act of 2017.   Our work includes the preparation of project feasibility analysis and assistance with due diligence underwriting of specific investment opportunities.

The Federal Tax Cuts and Jobs Act (“TCJA”) created qualified “opportunity zones” in December 2017 to encourage tax-favored investment in distressed communities throughout the U.S.  Under the new law, investors may be able to defer tax on almost all capital gains they invest after Dec. 31, for years ending 2018 through 2026.

Project Feasibility and Due Diligence

Just like any of the incentive-based real estate and business investment programs of the past, this federal program has two primary requirements.    First, all of the usual underwriting is required, just like any other real estate or business acquisition venture.    The incentive boosted returns come with successful projects.

However, once feasibility is established, the due diligence requirements are quite specific – projects must federal underwriting guidelines and the investment program needs to consider federal expectations for how capital is introduced and exited.

As well and as noted by the SEC in the spotlight on opportunity zones, “… interests in a qualified opportunity fund offered and sold to investors will typically constitute securities within the meaning of federal and state laws except in limited circumstances. As a result, such qualified opportunity funds must comply with all applicable regulations of the SEC and the securities regulators in the states where they are doing business, in addition to other applicable regulations, such as those of the Internal Revenue Service and Treasury Department.”

Since the law’s passage, the Treasury Dept. has published further guidance as to how Opportunity Zone tax-advantaged projects may proceed, and this guidance is likely to continue to evolve.   Currently, there are four primary requirements for a real estate development or acquired business, to achieve the status of “Qualified Opportunity Zone Business Property” (herein, “Qualified Projects”).   These requirements are listed below.

Experience Related to Work as Qualified Opportunity Zone Consultants

Matters Related to Qualified Opportunity Zones

More about Opportunity Zone Consultants

There are four primary requirements for a real estate development or acquired business, to achieve the status of “Qualified Opportunity Zone Business Property” (herein, “Qualified Projects”):

The property must be located in a designated Opportunity Zone;

The property must be tangible property used in a trade or business;

The property must be acquired by purchase for cash after December 31, 2017. If a property was acquired before December 31, 2017 by its current owner, the property may have to be sold to an unaffiliated purchaser after December 31, 2017 in order to meet this requirement. The Internal Revenue Code provides detailed rules for determining whether parties to a sale transaction are affiliated or unaffiliated. Under these rules the original owner of the property may be able to retain a minority interest in the new owner of the property.

The property must be either (a) new construction that is not put into use until after the purchase of the property; or (b) “substantially improved” after purchase of the property, which requires that the costs of constructing, renovating or expanding the property during any 30-month period beginning after the date of the acquisition of the property must exceed 100% of the adjusted basis of the property at the start of the 30-month period. For the purpose of determining substantial improvement, the IRS has further stated that only the value of the building (improvements) need to be considered and not the underlying value of the land.

Opportunity Zone Consultants