Now that we have all had a chance to celebrate a Merry Christmas, a Happy Kwanzaa or a Happy Hanukah, and have had the chance to digest 544 pages of final OZ regs \u2013 what, you say you have not really studied the new final regs yet \u2013 can\u2019t be the case :) !<\/p>\n
As we are working feverishly (with beer as our our co companion along with my trusty dog Marty) I wanted to list out what I see as some really nice clarifications and additional flexibility that the final regulations provided \u2013 ok to disagree or chime in with your favorites if you want.<\/p>\n
1. Working Capital Plan Timing \u2013 increase of up to 62 Months not just 31 month safe harbor for QOZBs with a working capital plan;<\/p>\n
2. Ability to sell assets from a QOZB after ten years and still have elimination benefit clarification. Like this a lot. Logical but appreciated on the clarification.<\/p>\n
3. Real Property Straddling a site \u2013 2 enumerated tests for real property that straddles a zone and a non-zone \u2013 square footage and value;<\/p>\n
4. \u201cOriginal Use\u201d for Brownfields investments so long as they are made safe;<\/p>\n
5. \u201cOriginal Use\u201d for vacant property which was 1 year vacant when designated as an OZ in 2018 and which remains vacant until purchase or real property that was vacant for 3 years prior to purchase \u2013 both count as Original Use property and represents a reduction from 5 years;<\/p>\n
6. Aggregation \u2013 the ability to aggregate assets within a site and within adjacent sites for purposes of qualifying for the 90% test;<\/p>\n
7. Timing \u2013 clarity and additional flexibility for partners of a partnership and shareholders of an S corp. to invest amount of capital gains in a QOF 180 days from the due date (without extension) of the entity they are involved in;<\/p>\n
8. Business Property Gains \u2013 the ability to not have to net capital losses with capital gains on 1231 property enables more gains to be eligible for investment within OZs;<\/p>\n
9. Personal property used in an opportunity zone business can be counted for purposes of meeting the \u201csubstantial improvement\u201d test. This includes section 1245 property that is not included in the basis of a building; and<\/p>\n
10. Leases \u2013
\n\u2022 Leases from state and local governments and tribes are not required to be at market rate. This policy is intended to facilitate arrangements where governments hope to encourage development by offering favorable leasing terms.
\n\u2022 Leases that are not between related parties are presumed to be at market rate.
\n\u2022 The working capital safe harbor is extended 24 months, for a total of 55 months, when a project is delayed due to a disaster and the opportunity zone is located in a federally declared disaster area.<\/p>\n
11. Sin Businesses \u2013 Some would say that the allowance of less than 5% sin business as part of a property should be a top ten, but we will leave that at 11 and a topic for a different day, as I am not sure why having a tenancy of a sin business would be relevant to the real estate investment in a building and\/or adaptively reusing of a property. It impacts NOI yes, but would not impact the real property investment and substantial improvement thereof or the original use thereof so not sure what the hubbub is here but happy to ruminate.<\/p>\n
Take a look and DM me (get it) with your thoughts or views or other key provisions you like or dislike. Busy working on a few more closings before the 12\/31\/19 witching hour where we will lose the 15% reduction, but around and happy to chat at your convenience. Fun and interesting deals. Come join the party. -Brad<\/p>\n","protected":false},"excerpt":{"rendered":"
Now that we have all had a chance to celebrate a Merry Christmas, a Happy Kwanzaa or a Happy Hanukah, and have had the chance to digest 544 pages of final OZ regs \u2013 what, you say you have not really studied the new final regs yet \u2013 can\u2019t be the case :) ! As … <\/p>\n