Opportunity Zone Magazine Opportunity Zone Magazine Volume 1, Issue 1 | Page 85

COMMON MISCONCEPTIONS SURROUNDING THE OPPORTUNITY ZONE INITIATIVE
early to develop or re-develop in the current cycle of that
neighborhood, he could realize several percentage points of
additional yield after 10 years due to the potential tax-free
nature of the gains, and that if the neighborhood continues
to redevelop, that tax-free benefit could be extraordinary.
That’s the simplicity of the program. However, many
misconceptions have developed over the past several months.
At the fund level and investor level, the program is not
just about raising the money — it’s about deploying the
money. Raising the fund is only part of the process. Deploying
the funds per the regulations within certain timelines and within
profitable projects, is arguably more critical — in particular with
penalties that can be incurred by the funds for not meeting
certain tests such as the timing of the deployment of capital.
Experience and track record counts — this is no different than
when considering any other fund investment or fund manager.
The program is not a grant or related type of program.
The incentives are purely economic and designed to
encourage private individuals with capital gains to reinvest
into areas and businesses that they might not otherwise invest
in. Even though we all have a responsibility for one other, the
program has no social impact requirement; at the same time,
through the simplicity of the incentives, it has the potential
to create meaningful social and societal impact.
Raising the fund is only part
of the process. Deploying
the funds per the regulations
within certain timelines and
within profitable projects, is
arguably more critical...
The program was not specifically designed nor created
to develop affordable housing; frankly, it was not
specifically designed to develop any particular class
of real estate. Contrary to some of the political rhetoric
and chatter, the program was developed to encourage
private investment that would create jobs and improve
neighborhoods that need it the most. While improving the
stock of affordable housing can contribute to those ends, it
is not the focus of the program.
The program does not allow the circumvention of SEC
or related laws surrounding fundraising. With very
few exceptions (such as perhaps a family office that does
not intend to raise outside funds and will invest on its own
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