LC-06 · Tax
Opportunity zone deferral
A tax break wearing a hard hat
In ordinary words
Investors can defer and sometimes reduce tax on prior capital gains by parking those gains in a qualified opportunity fund aimed at designated census tracts.
Why people call it a crime
The poster said the tax break would rebuild neglected neighborhoods. Reporting later found luxury projects in already-rising areas. People call that a subsidy with a community costume.
A scene, not a hypothetical statute
An investor sells stock, owes a large gain, and drops the gain into a fund that builds market-rate apartments in a designated tract next to a downtown that was already improving. The neighborhood designation did the legal work.
In legal terms
IRC §§ 1400Z-1 and 1400Z-2, enacted in 2017, let eligible gains rolled into a qualified opportunity fund within 180 days be deferred, with basis adjustments if holding periods are met, and potential exclusion of post-investment appreciation after ten years. Governors nominated tracts under statutory criteria; Treasury certified them.
The statute is an incentive program. It does not require proof that a project was the cheapest housing or that it hired local residents, beyond the code’s property and timing tests.
IRC §§ 1400Z-1, 1400Z-2.
Where it stops being legal
Funds that fail the 90-percent asset test, miss deadlines, or invest in non-qualified property lose the benefit. False certifications can be civil or criminal tax violations.