How can I best use venture capital to support my startup company in an OZ?

Answers

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  Jonathan McGuire

  Aldrich CPAs and Advisors

  December 04, 2019

  You must have a significant portion of your assets inside of a zone and be qualifying property. This is measured at 70% of total assets either based upon financial statement value or original cost. There are three ways a QOZB can measure income. The first is an hour test where 50% or more of the work is performed in a zone. The second is a dollar value test where work performed in a zone generates 50% or more income. The third is that tangible property and essential business functions located in the zone are responsible for generating at least 50% of income.

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  Matthew Rappaport

  Falcon Rappaport & Berkman

  December 05, 2019

  The fund can theoretically be located anywhere, but the business certainly has to be primarily within an OZ. There are three safe harbors and a facts-and-circumstances test for the 50% requirement, so the proposed regulations are meant to be generous, but you can't finagle OZ treatment for a business that is both located outside the OZ and conducting the majority of its operations outside the OZ. The program is flexible, but not infinitely flexible.

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  Maria De Los Angeles Rivera

  Kevane Grant Thornton

  December 06, 2019

  The business must always comply with different tests. 70% of the property must be qualified opportunity zone business property, and 50% of the income must be derived in a zone. Therefore, the business must be located in a zone while the fund does not have to be located in a zone.

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