Taking advantage of “Opportunity Zones”

For developers — and investors — these opportunities run deep.


It’s already been a year since the fervor and political debate that led up to the Tax Cuts and Jobs Act, passed by Congress near the end of 2017. While there has been plenty of press about the actual cuts and their impact on citizens, businesses and the government, there hasn’t been nearly as much of a focus on one somewhat unique element of the act: the establishment of “Opportunity Zones” meant to encourage community development.

Here’s a brief summary: individual states were given six months (until June of this year) to designate distressed communities which could benefit from development. The Opportunity Zones have now been approved by the U.S. Treasury, and investors can re-invest their unrealized capital gains (within 180 days of a sale) into “Opportunity Funds” (OF) that are dedicated to investing into these Opportunity Zones (OZ).

There are attractive opportunities in this program for both businesses, real estate developers and investors:

For developers, establishing a fund for their qualified projects can help generate third-party investment capital. Developers can also use their fund to defer tax on the sale of capital assets. For example, if a developer puts capital gains generated from the sale of a capital asset into a fund for eight years, with the basis increase and a 5% present value discount to value the deferral, investors would pay only 57% of what they otherwise would pay in taxes.

In the case of a passive investor, OF investments can defer tax payments on recognized gains for up to eight years. In addition, if the investor holds the investment in the OF for at least ten years, all appreciation of the OF investment would accrue tax-free.

Within the investment community the program is considered quite generous: one of the better tax-reducing efforts put forth by the government in years. Like tax credits for historic rehabilitation, toxic land clean-up, development of affordable housing, and the creation of renewable energy, the program is an example of how developers and investors can contribute to the public good while being allowed to profit for their efforts.

Companies like The Cherrytree Group are working with developers to help them take advantage of this program, and plan to introduce funds for investors who wish to be part of this initiative.
I won’t jump too far into all the details of the OZ program, but here are some points that are of particular interest for real estate developers and investors:

  • No investments will be allowed in “sin” businesses, i.e. country clubs, golf courses, massage parlors, gambling establishments, alcoholic sales businesses
  • An investment must be used in the OZ for “substantially all” of the holding period (we assume this will be interpreted by the IRS as 70-80%)
  • Original use must commence with the taxpayer, or the taxpayer “substantially improves” the property during the 30-month period after acquisition
  • Substantially improve” means the improvements are for 100% or more of the purchase price
  • The funds are not limited by the taxpayer, and the funds are not traced. Purchases must be from unrelated parties, i.e. ownership of less than 20%
  • Taxpayer has 180 days from the date of a sale to invest into a OF, which then has 180 days to invest into an OZ property. A very attractive aspect of the OZ legislation is that a taxpayer can invest up to the whole gain, but not are required to invest all of it, and the taxpayer is able to retain the non-taxable basis, which is not permitted in the 1031 Rules.
  • Capital gains rates will be 15% for amounts under $426,700 and 20% for over that amount. Additionally, we are required to add the 3.8% tax that funds Affordable Care, which is sometimes referred to as the “Obama Medical Tax”. As an example, consider a $1 million capital gain invested into an OF. The capital gains rate currently is 23.8%, or $238,000 in taxes. Those taxes can be deferred to 12/31/2026 per the OZ legislation, at which point the taxes would be due at 85% of the amount, i.e. $202,300, representing a $36,000 savings. Moreover, if the $1,000,000 appreciated to $1.5 million over the 10 year period, there would be no tax on the $500,000 appreciation.

So, how do Opportunity Zones stack up against other ways for a developer to structure a deal or for an investor to place his/her money? In of themselves they are a “shallow” subsidy, (i.e. by itself it is not enough of a return), but when coupled with other economic returns (tax credits, depreciation, cash flow) Opportunity Zones become a good, even great, investment.

The Cherrytree Group has been successful in helping both developers and investors realize major tax savings through the syndication of both state and Federal tax credit programs for historic renovation, renewable energy or land clean-up. Many of the projects that are ideal for tax credit deals, if located in a qualified Opportunity Zone, have the potential to yield even greater benefits.

Even the savviest investor requires expert assistance in navigating this field, and we’re pleased to discuss the pros and cons of Opportunity Zones to anyone who is interested in exploring the opportunity.

Want to learn more about developing or investing in Opportunity Zone funds? Cherrytree Group recently has been featured in the Boston Business Journal and Boston BisNow.

Recent Posts

Recent Comments




Written by:


  1. Excellent post! We are linking to this particularly great post on our website.

    Keep up the great writing.

  2. December 3, 2019

    What i don’t understood is in fact how you’re no longer
    actually a lot more well-appreciated than you may be
    now. You’re so intelligent. You know therefore considerably in the case of
    this topic, produced me individually imagine it from numerous varied angles.
    Its like men and women don’t seem to be involved
    except it’s one thing to do with Woman gaga!

    Your individual stuffs great. Always take care of it up!

  3. December 5, 2019

    Nice blog here! Also your site loads up fast! What web host are
    you using? Can I get your affiliate link to your host?
    I wish my site loaded up as fast as yours lol

  4. December 5, 2019

    As the admin of this website is working, no uncertainty very rapidly it will
    be famous, due to its quality contents.

  5. December 6, 2019

    Hey there! I just would like to offer you a huge thumbs up for the great information you’ve got here on this post.
    I will be returning to your website for more

  6. December 6, 2019

    I was curious if you ever thought of changing the structure of your website?
    Its very well written; I love what youve got to say.
    But maybe you could a little more in the way of content so people could connect
    with it better. Youve got an awful lot of text for
    only having one or two pictures. Maybe you could space it out better?

  7. December 6, 2019

    I’m not that much of a internet reader to be honest but
    your sites really nice, keep it up! I’ll go ahead and
    bookmark your website to come back down the road. Cheers

  8. December 6, 2019

    Your style is really unique in comparison to other people I’ve read
    stuff from. Many thanks for posting when you’ve got the opportunity, Guess I’ll just bookmark this site.

  9. December 6, 2019

    Undeniably believe that that you said. Your favorite reason seemed to be on the internet the easiest thing to remember of.

    I say to you, I definitely get irked while other people consider concerns that they plainly do not recognise about.
    You managed to hit the nail upon the highest and outlined out the entire thing with no
    need side-effects , other people can take a
    signal. Will likely be back to get more. Thanks

  10. December 7, 2019

    Can I just say what a relief to discover someone that
    really understands what they’re discussing online.
    You actually realize how to bring a problem to light and make it important.
    More and more people should read this and understand this side of the story.
    I was surprised that you’re not more popular since you certainly have
    the gift.

  11. December 9, 2019

    I think that what you posted made a bunch of sense. However, what about this?
    suppose you typed a catchier post title? I ain’t
    saying your information isn’t solid., however what if you added something that makes people desire more?
    I mean Taking advantage of “Opportunity Zones” – Warren Kirshenbaum, President of
    the Cherrytree Group, LLC is a little boring. You might peek
    at Yahoo’s home page and note how they write news headlines
    to get viewers interested. You might add a video or a picture or two
    to get readers interested about everything’ve written. In my opinion, it might bring your posts a little livelier.

  12. December 9, 2019

    My brother recommended I might like this blog. He was entirely right.
    This post truly made my day. You cann’t imagine just how much time I had
    spent for this info! Thanks!

  13. December 10, 2019

    Nice blog here! Additionally your web site quite a bit up very
    fast! What host are you the use of? Can I am getting your affiliate hyperlink in your host?
    I desire my website loaded up as quickly as yours lol

  14. December 11, 2019

    Heya i’m for the primary time here. I found this board and
    I in finding It really helpful & it helped me out much.
    I hope to offer something back and aid others like you aided me.

  15. December 12, 2019

    When some one searches for his essential thing, thus he/she wishes to be available that in detail, therefore that thing is maintained over here.

  16. December 13, 2019

    Hello, I enjoy reading all of your article.
    I like to write a little comment to support you.

Leave a Reply

Your email address will not be published.