You are on page 1of 2

APRIL 2018

CLIENT ALERT
OPPORTUNITY ZONES IN ALABAMA (AND 19 OTHER STATES)
CERTIFIED BY TREASURY DEPARTMENT - WHAT HAPPENS NEXT?
On April 18, the Treasury Department certified the list of 158 Opportunity Zones submitted by
Governor Kay Ivey on March 21, 2018. This certification marks the last step in the Opportunity Zone
selection process and means that the Census tracts selected will remain Opportunity Zones for the
next 10 years.

PolicyMap has published a map of all certified Opportunity Zones nationwide in a mobile format –
available here and is in the process of updating the site to include the new certifications released
yesterday. A map of Alabama’s new Opportunity Zones is available from the Treasury Department here.

As of March 18, the Treasury Department has certified Opportunity Zones in 20 states (Alabama,
Arizona, California, Colorado, Delaware, Georgia, Idaho, Kentucky, Michigan, Mississippi, Missouri,
Nebraska, New Jersey, Ohio, Oklahoma, South Carolina, South Dakota, Texas, Vermont and Wisconsin)
and four territories (American Samoa, Northern Marianas Islands, Puerto Rico and the U.S. Virgin
Islands). These states and territories submitted their Opportunity Zone nominations by the original
March 21 deadline. States that did not submit by the original deadline must submit their nominations
by the extended deadline of Friday, April 20 to be considered.

As described in greater detail in our February client alert, the Opportunity Zone program was created
as a part of the Tax Cuts and Jobs Act of 2017 as an incentive tool to spur place-based investment in low-
income communities. The program incentivizes investors to make equity investments in Opportunity
Zone-based businesses and development projects by providing:

• A temporary tax deferral for any realized, but not recognized, capital gains reinvested through
the program (the “Original Gain”);

• The potential for a 10% to 15% reduction in the amount of tax otherwise payable on the
Original Gain; and

• If the investment in the Opportunity Zone is held for ten years or more, a permanent exclusion
of any capital gains derived from the eventual sale or exchange of the Opportunity Zone
investment (not the Original Gain).

w w w. b a l c h . c o m Alabama Florida Georgia Mississippi Wa s h i n g t o n , D C

No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers.

1
APRIL 2018

CLIENT ALERT
OPPORTUNITY ZONES IN ALABAMA (AND 19 OTHER STATES)
CERTIFIED BY TREASURY DEPARTMENT - WHAT HAPPENS NEXT?
To receive any of the tax benefits described above, all Opportunity Zone-based investments must be
made through a Qualified Opportunity Fund (“QOF”). The Treasury Department is responsible for
providing guidance on the QOF certification process, and Opportunity Zone-based investment activity
is unlikely to occur until that guidance is finalized.

Aside from the QOF certification process, a number of major questions about the program remain,
including how QOF investments will be structured, how QOFs will deal with sales of Opportunity
Zone-based businesses in which they have invested during the 10-year holding period, and what (if any)
tax benefits might accrue to QOF investors without capital gains.

Balch & Bingham is collecting comments on the QOF certification and investment process to submit to
the Treasury Department on behalf of its clients, investors, developers, and community members. Please
reach out to aflachsbart@balch.com or druth@balch.com with any questions about the program or
comments you would like to have submitted to the Treasury Department.

For regular updates on Opportunity Zone program developments and discussions of the tax and
securities law implications of the program as it develops, please email jcapello@balch.com with the
subject line “OZ Updates.”

CONTACTS:
ALEX FLACHSBART MARTHA MILLER
Attorney | Birmingham Partner | Birmingham
aflachsbart@balch.com mlmiller@balch.com
(205) 226-3419 (205) 226-478

DAN RUTH TIM TRACY


Attorney | Birmingham Partner | Birmingham
druth@balch.com ttracy@balch.com
(205) 226-8729 (205) 226-3456

w w w. b a l c h . c o m Alabama Florida Georgia Mississippi Wa s h i n g t o n , D C

No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers.
2