DC Launches Local Opportunity Zone Tax Benefit Regulatory Process

• November 2nd 2020

by Nena Perry-Brown

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More than two years since DC designated 25 Opportunity Zones (OZs), the city is implementing its own layer of tax incentive regulations.

Opportunity Zones are a designation for low-income census tracts meant to incentivize real estate development through Qualified Opportunity Funds (QOFs) that temporarily shield those investments from taxation. When an asset (whether tangible property, stock, or partnership interest) is sold, the resulting capital gains can be deposited into a QOF and will not be taxed until 2026, or until the investment is sold.

Thus far, DC has followed the federal guidelines and replicated those tax benefits on the local level so that investors in QOFs could also avoid DC's capital gains taxation. Now, as part of the fiscal year 2021 budget, DC is adding a layer of oversight to better target its OZ incentives.

In order to benefit from Opportunity Zone tax shielding in DC, investors will have to participate in Qualified Opportunity Funds that are registered with the District. The QOF does not need to be based in DC, but needs to invest in projects in one of the city's 25 OZs that have either been granted another economic development incentive by DC; are an Office of the Deputy Mayor for Planning and Economic Development (DMPED)-awarded project; have received a letter of support from the Advisory Neighborhood Commission; or have scored at least a 75% on the Urban Institute Opportunity Zone Community Impact Assessment Tool.

"This new process is an effort to better align OZ investments with community priorities, maximize benefits to existing residents, businesses and organizations located in the District’s QOZs, and increase transparency of investments," a press release states.

Additional UrbanTurf reporting on Opportunity Zones:

• Two Reports Offer Perspective on How Opportunity Zones are Falling Short
• The DC Opportunity Zones That Saw Home Prices Pop Over the Last Year
• The Opportunity Zone Effect? Home Prices up 20 Percent in OZs Nationwide
• Maryland Site Offers the Opportunity to Own in Opportunity Zones
• Tax Rules Released Regarding Opportunity Zones
• DC Nominates 25 Opportunity Zones

This article originally published at https://dc.urbanturf.com/articles/blog/dc-launches-local-opportunity-zone-tax-benefit-regulatory-process/17478.