A quick thank you shout out to Craig Bernstein of OPZ Bernstein for being my guest on this month\u2019s webinar installment of “From the Land of OZ”, our monthly Duane Morris Opportunity Zones webinar. If of interest, it is on tape and you can listen in at your convenience \u2013 we discussed the final regulations, fund deployment, fund creation and social impact investing.<\/p>\n
First, the annoying News From the IRS involving QOZBs and the 70% test – prior to last week there was no written (or spoken) prohibitions on cash from a QOF being placed into a QOZB per a working capital plan counting for the 70% test at the QOZB level. As such, it was widely accepted by tax practitioners that cash in the QOZB bank account on the applicable testing date would be eligible to count for the 70% test. That is, until last week when an IRS official advised the working group at the RE Roundtable that cash that is not invested yet in the QOZB in real property or in a business does NOT count for the 70% test.<\/p>\n
As such, please be very careful when planning for and dealing with the 70% test to make sure that the cash that ends up in that account is invested and actually buys inventory or good or materials that will be used in the business or real estate on or before the testing date.<\/p>\n
Again, this is very new news and came out late last week from the IRS and you will NOT find it in writing anywhere. We will be confirming this in writing but, for the moment, I would assume this is the direction the IRS intends to go even though it\u2019s not in writing anywhere in the regs.<\/p>\n
In separate news, thanks to our pal Emily Lavery (rockstar policy person working with Senator Scott):<\/p>\n
On the State level:<\/p>\n
\u2022 In Colorado, a Montrose, CO-based co-working software company, received its third OZ investment through funding from the Center on Rural Innovation\u2019s Innovation Fund, an Opportunity Fund that invests in high-growth technology companies supporting job creation and revenue generation in rural communities. (EIG). Nice!<\/p>\n
\u2022 In Georgia, Vision unveiled for West End Mall\u2019s rebirth as mixed-use \u2018opportunity zone\u2019: West End\u2019s aging mall will be redeveloped into a bustling hub of offices, hotel rooms, and affordable housing that would set a national example for how federal opportunity zones could prosper is moving forward was unveiled, and investors with clout are buying in, according to project leaders. #Visionary<\/p>\n
\u2022 In California, Catalyst Opportunity Funds Invests in SoLa Impact Opportunity Zone Projects to Reenergize South Los Angeles Communities. The SoLa projects aim to revitalize underserved LA neighborhoods such as Compton, Watts and South Central through real estate development, with additional services like job training, financial literacy, and homelessness prevention. #impactinvesting<\/p>\n
\u2022 Also in California, a $250 Million Senior Living Facility is in the Works thanks to OZ\u2019s: The facility will be outfitted with 52 assisted living units and 32 memory care units. It will be the first senior living community built in San Jose in 35 years. #seniorliving<\/p>\n
\u2022 In Florida, an old Sears and mall property will become an “Innovation Community”: The project will have a focus on academic, scientific and technology uses thanks to Opportunity Zones. Preliminary plans for the former Sears store includes up to one million square feet of new office space; capacity for up to 400 hotel rooms, 1,000 apartment units and 100,000 square feet of street-level restaurants, shops, fitness and experiential concepts. #adaptivereuse<\/p>\n
\u2022 In Rhode Island, Opportunity Zones will Give Rise to Largest Economic Development Project in Pawtucket\u2019s History. This $400 million economic development project will transform Pawtucket\u2019s riverfront with extensive development, including a new United Soccer League (USL) Championship soccer team and stadium. The state\u2019s Democratic Governor, Gina Raimondo, was thrilled to see a $400M economic development project that will transform Pawtucket\u2019s riverfront with extensive development, including a new United Soccer League (USL) Championship soccer team and stadium \u2013 all made possible because of Opportunity Zones. This project will add more than $130 million annually to the state\u2019s GDP, and create more than 3,500 jobs. The Tidewater Landing project will include key infrastructure upgrades, a new multi-use stadium, a new indoor sports complex, market-rate and workforce housing, a hotel, and commercial office space. #OZSoccer #$400M<\/p>\n
\u2022 In Kentucky, a $22.5M renovation coming to former YMCA building in Covington, KY: The former YMCA building and Gateway Bookstore in Covington, Kentucky have sat vacant since 2015. Now, with the help of Opportunity Zone financing, the two historic buildings will undergo a $22.5 million renovation. The mixed-use project, which expects to create over 100 new jobs, will include office space, 60 hotel units from the nearby Hotel Covington, and will serve as a northern trailhead for the Kentucky bourbon industry. #YMCAOZ<\/p>\n
\u2022 In Alabama, the City of Opelika announced a new 105-acre Innovation and Technology Park to be built in an Opportunity Zone. the OTIP has Easy access to East Alabama Medical Center, Tiger Town, Historic Downtown Opelika, Southern State Community College and Auburn University. \u201cOpelika has been incredibly proactive about harnessing the power of its Opportunity Zone. Its vision for building a place where innovation and technology can co-exist matches perfectly with the spirit of the Opportunity Zone incentive, which facilitates investment in both buildings and the companies that occupy them,\u201d said Alexander Flachsbart, CEO of Opportunity Alabama. #RollTide<\/p>\n
On the Federal Level:<\/p>\n
\u2022 Treasury has FINALIZED the 2019 versions of OZ tax forms! This includes form 8996 (funds) and the new form 8997 (investors) for the 2019 tax year.<\/p>\n
\u2022 the Opportunity Zone Catalyst Grand Prize winners of the of the Forbes OZ 20 were announced at Sorenson Impact Center\u2019s Winter Innovation Summit in Salt Lake City, UT. The City of Erie and Opportunity Alabama emerged as the top two Community Organizations. The SoLa Impact Fund and Four Points Funding were named the top two Opportunity Zone Funds.<\/p>\n
\u2022 Recently, Novogradac has reported that the 513 Qualified Opportunity Funds they are tracking now represent $68.75 billion in community development investment capacity. Novogradac is also now reporting that the 308 funds reporting equity raised, are now reporting a total $7.57 billion in equity raised! That\u2019s near a one billion dollar increase over the last month and a ~50% increase since December. However, per Emily, as Tax Notes recently noted, these numbers may just be the tip of the iceberg. \u201cMost of our transactions and most of the money we\u2019re seeing flow through these qualified Opportunity Zones is through proprietary or private funds \u2014 funds that would not be reporting to any of these fund listing agencies or databases.<\/p>\n
Over and out from the Land of OZ \u2013 if you have questions, comments, thoughts or want to appear on our monthly webinar \u2013 please do not hesitate to contact me at your convenience \u2013 email finds me fastest – bamolotsky@duanemorris.com. Have a super weekend.<\/p>\n
-Brad A. Molotsky, Esq., Duane Morris, LLP<\/p>\n","protected":false},"excerpt":{"rendered":"
A quick thank you shout out to Craig Bernstein of OPZ Bernstein for being my guest on this month\u2019s webinar installment of “From the Land of OZ”, our monthly Duane Morris Opportunity Zones webinar. If of interest, it is on tape and you can listen in at your convenience \u2013 we discussed the final regulations, … <\/p>\n