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What are the qualifications for setting up a Qualified Opportunity Zone business?

What are the qualifications for setting up a Qualified Opportunity Zone business?


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  • Brandon Jones
    May 22, 2019

    70% or more of tangible property of the Opportunity Zone business has to be qualified Opportunity Zone property. The business has to generate more than 50% of its gross income from inside a qualified Opportunity Zone. No more than 5% of the businesses assets can be "nonqualified financial property," including cash or cash equivalents unless holding them pursuant of a written plan and the money will be spent within 31 months of receipt by the Opportunity Zone business. Lastly, the Opportunity Zone business cannot be engaged in a "sin" business.

  • Debbie Klis
    May 22, 2019

    Regarding the qualifications for setting up a qualified Opportunity Zone business (QOZB), the entity must be a partnership or corporation for federal income tax purposes (not a disregarded entity) that satisfies a variety of tests including: at least 70% of the tangible property it owns or leases is QOZBP; at least 50% of its gross income is from the active conduct of a trade or business in a QOZ; at least 40% of its intangible property is used in the active conduct of its business; no more than 5% of its assets are nonqualified financial property; and it is not a “sin business.” A QOZB may hold reasonable working capital unlike a Qualified Opportunity Fund (QOF). Thus, most QOFs are likely to have a two-tier structure. Investors invest in a QOF that invests in an entity that is a QOZB.

  • Peter McNeil
    May 22, 2019

    An OZ business only needs to have 70% of its assets be qualified OZ assets. To be a qualified Opportunity Zone business, the business must also pass one of the following tests. One, 50% of revenues must generated from or inside the Opportunity Zone or 50% of revenues are generated to the Opportunity Zone. Two, 50% of employee hours or wages paid are in the Opportunity Zone. Three, 50% of management responsible for generating revenue must be inside the Opportunity Zone.

  • Matthew Rappaport
    May 22, 2019

    In a nutshell: One, the QOZ business must be a tax corporation or a tax partnership. Two, equity in a QOZB must be at original issue, solely in exchange for cash. Three, the QOZB must be organized for the sole purpose of serving as a QOZB. Four, at least 70% of the QOZB's tangible property must be QOZBP. Five, at least 50% of the QOZB's income must be derived from within the QOZ. Six, the QOZB must conduct an active trade or business under Section 162 that is not a sin business. Seven, 5% or less of the QOZB's aggregate adjusted basis of all property can be non-qualified financial products, subject to a working capital safe harbor. The foregoing is general information and not legal or tax advice.

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