GEORGIA DEPARTMENT OF COMMUNITY AFFAIRS Federal Qualified Opportunity

GEORGIA DEPARTMENT OF COMMUNITY AFFAIRS _______________ Federal Qualified Opportunity Zones October 10, 2018 FALL CONFERENCE 2018

Federal Opportunity Zones - Background SEC. 13823. OPPORTUNITY ZONES. (a) In General. --Chapter 1 is amended by adding at the end the following: ``Subchapter <<NOTE: 26 USC prec. 1400 Z 1. >> Z--Opportunity Zones ``Sec. 1400 Z-1. Designation. ``Sec. 1400 Z-2. Special rules for capital gains invested in opportunity zones. ``SEC. 1400 Z-1. <<NOTE: 26 USC 1400 Z-1. >> DESIGNATION. ``(a) Qualified Opportunity Zone Defined. --For the purposes of this subchapter, the term `qualified opportunity zone' means a population census tract that is a low-income community that is designated as a qualified opportunity zone. ``(b) Designation. -- ``(1) In general. --For purposes of subsection (a), a population census tract that is a low-income community is designated as a qualified opportunity zone if-- ``(A) not later than the end of the determination period, the chief executive officer of the State in which the tract is located-- ``(i) nominates the tract for designation as a qualified opportunity zone, and ``(ii) notifies the Secretary in writing of such nomination, and ``(B) the Secretary certifies such nomination and designates such tract as a qualified opportunity zone before the end of the consideration period. ``(2) Extension of periods. --A chief executive officer of a State may request that …. . The Tax Cuts and Jobs Act of 2017 created Federal Opportunity Zones Tax benefit to incent long-term equity investments Connect low-income communities with capital

What are Federal Opportunity Zones? Low-income community census tracts designated for investments 25% of State’s low-income community census tracts were eligible for designation Governor Deal approved 260 recommended census tracts that were approved by Treasury in March 2018 Designation as Federal Qualified Opportunity Zones lasts for 10 years.

Incentives for Investors - Overview Temporary Deferral on Capital Gains Reduction in Capital Gains Liability Tax Exemption on Gains of Opportunity Fund

Investor Incentive - Timeline Year 1: Capital Gain is Invested Year 5: 10% Step-Up in Basis Year 7: 5% Additional Step-Up in Basis 12/31/26: Tax on Deferred Gain is Due Year 10: No Tax on Post Acquisition Appreciation

What are Opportunity Funds? Investment vehicles organized as corporations or partnerships Flexible structure Self certified (Subject to further Treasury guidance) Must invest 90% of their assets in federal qualified opportunity zone property

Types of Opportunity Funds National or Local Specialized or Diversified Closely-held or Professionally Managed Single Project or Portfolio of Projects

What is Qualified Opportunity Zone Property? Three types of eligible investments: 1. Stock of a qualified opportunity zone corporation 2. Partnership interest in a qualified opportunity zone partnership 3. Business property used in a qualified opportunity zone

Diversity of Investments Business Ventures Affordable Housing Projects Commercial Development

Going Forward 260 Zones Certified in Georgia DCA website https: //dca. gov/community-economicdevelopment Federal Opportunity Zone Meeting in Atlanta q October 30, The Loudermilk Center, 7: 00 a. m. – 11: 45 a. m. Further guidance from IRS/Treasury – Q 4 of 2018? 2019 – Opportunity Funds Establish and Investments Flow 2020 + 2021 – Funds Reach 90% Thresholds

General Thoughts on Federal Opportunity Zones Comments and Questions

Contact information Holly Hunt, FOZ Coordinator (404) 679 -3144 holly. hunt@dca. gov Federal. OZ@dca. gov www. dca. gov Community & Economic Development Federal Qualified Opportunity Zones