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Do residents of non-conforming states receive the OZ benefits if they invest in an Opportunity Zone project in a state that conforms with the federal OZ regulations?

I live in California but have invested in an Opportunity Zone project in Utah. Do I get to defer my CA tax liability for up to 7 years?


Answers
  • Kim Taylor
    July 23, 2019

    Generally, the tax benefit is only going to apply to your state taxes if your state allows it.

  • Paul Wassgren
    July 10, 2019

    Unfortunately, in that scenario, the California tax would still be payable in the current tax year (i.e., no deferral). The investor's state of residence determines whether state-level taxation applies on the prior gain.

  • Scott McIntosh
    July 10, 2019

    No, the laws of your state of residence rather than where you are re-investing will determine whether you can defer those gains on your state return.

  • Guy Nicio
    July 10, 2019

    No, as a California resident, you pay tax on your worldwide income and you would get either a credit or deduction for taxes paid in other states. So in this case, you would get the OZ benefits for federal taxes only and you would have to pay the California tax liability as if there were no investment in the OZ. The Utah project would be of no benefit to you at the state level unless you were trying to defer Utah capital gains from a prior sale.

  • Erik Kodesch
    July 10, 2019

    I am not sure because I do not practice in California. However, I would think that,if California does not follow the OZ regime, then California residents would not be able to benefit, regardless of whether the investment is in California or in another state. However, I believe California partially conforms to the OZ regime in that certain types of OZ investments get the full benefit.