CitiSculpt: Opportunity Zone Experts
The Tax Cut and Jobs Act of 2017 (TCJA) signed by President Trump in December of 2017, gave American taxpayers substantive reductions in tax rates as well as an unprecedent gift to investors of all sizes. The TCJA included specific legislation to foster investment and development in targeted areas of poverty through the United States. These targeted areas are called Opportunity Zones and the legislation is primarily focused in urban areas. The Opportunity Zones unlike the former Promise Zones which were essentially rural areas needing investment, offer substantial tax benefits to investors.
When was the last time (the answer is never), that the Internal Revenue Service gave you eight years to pay capital gains taxes; and when was the last time (answer is never) the IRS gave you a 15% reduction in those taxes? The brilliance of the legislation is a strategy to defer harvested capital gains and reinvest those gains in the Opportunity Zone, while enjoying the benefits of a very long time to pay those taxes coupled with a 15% reduction in those taxes. The gift gets better, if the investor of deferred capital gains hold the asset in the Opportunity Zone for ten years, then any gain on the investment is free of capital gains taxation. This unprecedented bi-partisan legislation is genuinely unique for the American taxpayer.
Since early 2009, the Dow Jones Industrial Index has risen nearly 200% (9,031 to 26,458), and as such many investors have enjoyed remarkable increases in their investments, and as discipled investors they are now contemplating and exit strategy to harvest those gains. Those investors that are tax adverse, will seek to redeploy the gained capital, and Opportunity Zones present a viable solution for tax deferral and long term payment and reduction cycle for the payment of those taxes.
CitiSculpt as an innovative commercial real estate developer, is on the forefront of this Opportunity Zone initiative, as we currently have a multi-million dollar development plan underway in an Opportunity Zone in downtown Greenville, South Carolina. This development plan is a mixed use plan with Class A office space, a 220 unit multi-family complex, a future boutique hotel site and a street level retail facility. Other Opportunity Zone development projects under consideration by CitiSculpt include properties in Charlotte and Durham North Carolina; and Greenville and Columbia, South Carolina.
For additional information on the CitiSculpt Opportunity Zone projects, please email Michael Miller, Chief Financial Officer (firstname.lastname@example.org).
Opportunity Zone: 10 Academy Street
Announcing an exciting new development project that is being made possible thanks to the Opportunity Zone Funding Program. With a targeted Closing Date of December 11th, 2018, the timeline of the new build section of 10 Academy Street will be less than 30 months from the start date.
Sold in various individual parcels at a time, this project will consist of an Office Building that will eventually become a part of a larger people friendly development. Additional projects will include:
Full service parking deck
Institutional quality multifamily project with 200-230 expected units
Quality “flag” limited service hotel built on site
A small Retail/Office building
At 10 Academy Street, Greenville, South Carolina the total purchase and buildout budget for this project is estimated at $100,000,000. CitiSculpt is creating an Opportunity Fund solely and specifically for this project. CitiSculpt will provide asset management and development services at market rates throughout the duration of this project. Additionally, CitiSculpt will dedicate its resources and employ various consultants to advise, design, facilitate, and diligently control all aspects of the project.
Utilizing talent, skill, ingenuity, and patience to create real estate developments that harmonize with the natural surroundings. We strive to create engaging, comforting, and attractive developments that benefit entire communities. Our goal with 10 Academy Street, Greenville, South Carolina is to use the OZ Program to create long-term economic growth and development and to generate and deliver a solid return for investors.
Want to Learn More?
CitiSculpt is committed to continuing shaping cities and improving lives through incredible and innovative developments in South Carolina.
If you’d like to learn more about the exceptional beauty and distinct natural features of downtown Greenville or would like to learn more about the Opportunity Zone Funding Program, please contact Michael Miller, Chief Financial Officer (email@example.com)
Frequently Asked Questions About Opportunity Zone Funds
Q. What is an Opportunity Zone?
A. An Opportunity Zone is an economically-distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment. Localities qualify as Opportunity Zones if they have been nominated for that designation by the state and that nomination has been certified by the Secretary of the U.S. Treasury via his delegation of authority to the Internal Revenue Service.
Q. How were Opportunity Zones created?
A. Opportunity Zones were added to the tax code by the Tax Cuts and Jobs Act on December 22, 2017.
Q. Have Opportunity Zones been around a long time?
A. No, they are new. The first set of Opportunity Zones, covering parts of 18 states, were designated on April 9, 2018. Opportunity Zones have now been designated covering parts of all 50 states, the District of Columbia and five U.S. territories.
Q. What is the purpose of Opportunity Zones?
A. Opportunity Zones are an economic development tool—that is, they are designed to spur economic development and job creation in distressed communities.
Q. How do Opportunity Zones spur economic development?
A. Opportunity Zones are designed to spur economic development by providing tax benefits to investors. First, investors can defer tax on any prior gains invested in a Qualified Opportunity Fund (QOF) until the earlier of the date on which the investment in a QOF is sold or exchanged, or December 31, 2026. If the QOF investment is held for longer than 5 years, there is a 10% exclusion of the deferred gain. If held for more than 7 years, the 10% becomes 15%. Second, if the investor holds the investment in the Opportunity Fund for at least ten years, the investor is eligible for an increase in basis of the QOF investment equal to its fair market value on the date that the QOF investment is sold or exchanged.
Q. What is a Qualified Opportunity Fund?
A. A Qualified Opportunity Fund is an investment vehicle that is set up as either a partnership or corporation for investing in eligible property that is located in a Qualified Opportunity Zone.
Q. Do I need to live in an Opportunity Zone to take advantage of the tax benefits?
A. No. You can get the tax benefits, even if you don’t live, work or have a business in an Opportunity Zone. All you need to do is invest a recognized gain in a Qualified Opportunity Fund and elect to defer the tax on that gain.
Q. I am interested in knowing where the Opportunity Zones are located. Is there a list of Opportunity Zones available?
A. Yes. The list of designated Qualified Opportunity Zones can be found at Opportunity Zones Resources and in the Federal Register at IRB Notice 2018-48. Further a visual map of the census tracts designated as Qualified Opportunity Zones may also be found at Opportunity Zones
Q: What do the numbers mean on the Qualified Opportunity Zones list, Notice 2018-48?
A: The numbers are the population census tracts designated as Qualified Opportunity Zones.
Q: How can I find the census tract number for a specific address?
A: You can find 11-digit census tract numbers, also known as GEOIDs, using the U.S. Census Bureau’s Geocoder. After entering the street address, select ACS2015_Current in the Vintage drop-down menu and click Find. In the Census Tracts section, you’ll find the number after GEOID.
Q. I am interested in forming a Qualified Opportunity Fund. Is there a list of Opportunity Zones available in which the Fund can invest?
A. Yes. The list of designated Qualified Opportunity Zones in which a Fund may invest to meet its investment requirements can be found at Notice 2018-48.
Q. How does a corporation or partnership become certified as a Qualified Opportunity Fund?
A. To become a Qualified Opportunity Fund, an eligible corporation or partnership self certifies. To self-certify, a corporation or partnership completes a form, due to be released in the summer of 2018, and attaches that form to its federal income tax return. The return with the attached form must be filed timely, taking extensions into account.
Q: Can a limited liability company (LLC) be an Opportunity Fund?
A: Yes. A LLC that chooses to be treated either as a partnership or corporation for federal tax purposes can organize as a Qualified Opportunity Fund.
Q. I sold some stock for a gain in 2018, and, during the 180-day period beginning on the date of the sale, I invested the amount of the gain in a Qualified Opportunity Fund. Can I defer paying tax on that gain?
A. Yes, you may elect to defer the tax on the amount of the gain invested in a Qualified Opportunity Fund. Therefore, if you only invest part of your gain in a Qualified Opportunity Fund(s), you can elect to defer tax on only the part of the gain which was invested.
Q. How do I elect to defer my gain on the 2018 sale of the stock?
A. You may make an election to defer the gain, in whole or in part, when filing your 2018 Federal Income Tax return. That is, you may make the election on the return on which the tax on that gain would be due if you do not defer it.
Q. I sold some stock on December 15, 2017, and, during the required 180-day period, I invested the amount of the gain in a Qualified Opportunity Fund. Can I elect to defer tax on that gain?
A. Yes. You make the election on your 2017 return. Attach Form 8949, reporting Information about the sale of your stock. Precise instructions on how to use that form to elect deferral of the gain will be forthcoming shortly
Q. Can I still elect to defer tax on that gain if I have already filed my 2017 tax return?
A. Yes, but you will need to file an amended 2017 return, using Form 1040X and attaching Form 8949.
Q. How can I get more information about Opportunity Zones?
A. Over the next few months, the Treasury Department and the Internal Revenue Service will be providing further details, including additional legal guidance, on this new tax benefit. More information will be available at Treasury.gov and IRS.gov