Opportunity Zone Magazine Opportunity Zone Magazine Volume 1, Issue 1 | Page 48

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OPPORTUNITY ZONE MAGAZINE | VOLUME 1
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ISSUE 1
Qualified Opportunity Funds:
Compare & Contrast
Direct & Indirect Investments
By Valerie Grunduski
What are the differences between direct and indirect investments when it comes to the amount,
timeframe, proposed regulations and investment strategies.
N
early every week, there are multiple reports of
new Qualified Opportunity Funds launching.
Once a sleeper provision of the Tax Cuts and Jobs
Act, the opportunity zone incentive has spurred a great
deal of activity as of late. While we are still awaiting
additional g uida nce f rom Trea sur y a nd the Inter nal
Revenue Service, fund managers have begun to feel they
have enough direction to start laying the groundwork in
this new investment space.
T he oppor tunit y zone prog ram wa s introduced with
the intention of spur ring investment in low-income
com mu nities. Wit h over 8,70 0 identi fied quali fied
opportunity zones, the potential impact is significant.
This program provides tax deferrals and gain exclusions
f o r i nve s t o r s w h o p l a c e c a p it a l g a i n s i n t o a n e w
investment vehicle known as a “Qualified Opportunity
Fund” (QOF). A QOF is an entity that self-certifies
t h at at lea st 90 p ercent of it s a s s et s a re Q u a li f ie d
Opportunity Zone Property (QOZP). QOZP consists of
qualified opportunity zone stock, qualified opportunity
zone partnership interests, or investment into Qualified
Opportunity Zone Business Property (QOZBP). As a
result, investments into QOZBP can be direct or indirect,
and it is important to understand how the statute and
proposed regulations provide different guidelines for these
two strategies.
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