TAMPA, Fla., May 14, 2019 /PRNewswire/ -- There is a new sustainable investment trend among savvy investors that's both altruistic and beneficial for tax planning: Opportunity Zone Funds.
It's no secret that the income and wealth gap in America has been widening since the 1970s. This economic disparity has caused many low-income communities to significantly lag behind upper and middle class neighborhoods. However, a new piece of legislation aims to address these inequalities with incentives for private capital to fill the funding gap and jumpstart the economies in these areas.
The Tax Cuts and Jobs Act, enacted in December 2017, provides investors with new tax incentives designed to stimulate long-term private investment in designated economically distressed communities across the United States known as Opportunity Zones (OZs). There are OZ's located in urban, suburban and rural areas.
"Investors who roll over eligible capital gains into investments in designated Opportunity Zone Funds can potentially defer and reduce tax on them, and can eliminate tax on any future fund appreciation if held for at least 10 years. The concept of community development using tax incentives to attract multi-year private investment is not new, however this legislation differs in that it is not subject to a tax credit allocation process, and the amount of tax benefit available to investors is limited only by the size of their own total capital gains," said UBS Market Head of Florida's Gulf Coast Greg Kadet.
There is, of course, a risk that the envisioned impact from this legislation won't be achieved. As of now, there are no government-mandated impact reporting requirements, so measuring success of the program and ensuring capital flows to those areas most in need of investment may prove difficult. The US Treasury has now released two rounds of proposed OZ regulations and guidance that is believed to provide sufficient detail to enable fund sponsors to offer credible investment solutions to market that provide investors with the opportunity to realize meaningful tax benefits and potential societal impact.
"Now is the time to evaluate if investing in OZ's is right for you," said Kadet. "UBS financial advisors located across Florida's Gulf Coast are looking towards the future of tax planning, and stand prepared to help answer your questions on Opportunity Zone Funds."
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