Debbie Klis a securities lawyer in the Opportunity Zone space with the global law firm of Rimon P.C.

“I am the bridge between real estate developers or sponsors and the capital gains investors or the venture capital fund sponsors and the capital gains investors,” she said. “I also structure single asset opportunity funds for single taxpayers with capital gains who desire to invest within an opportunity zone on their own terms.”

How and why did you get involved in the OZ industry?

My core practice area is private equity funds of all sorts involving the aggregation of capital from investors to accomplish something whether involving a single asset or multiple assets or multiple businesses. In early 2019, my clients started asking about opportunity zone funds and I thought whoa, I better learn about them … so I studied the multiple rounds of regulations and attended all of the IRS and Treasury hearings in DC and started writing and speaking on the topic.

What are some current trends you are seeing in the OZ market?

I am witnessing several interesting trends in the OZ market. Two of particular note are: First, the increased use of OZ Funds for venture capital funding which, I believe, is why the QOZ program was created to promote the investment in business in opportunity zones. More and more clients are moving their businesses to OZ to raise funds to grow and at times to also buy real estate for the business.

Secondly, the use of QOFs to raise funds to convert abandoned or undervalued hotels to workforce housing, which is a product that serves working families in communities where insufficient affordable housing exists but this is not subsidized housing as this group does not qualify for government-subsidized affordable housing. I’ve been involved with several projects coast to coast in the past 12 months, which have turned underutilized properties into beautiful and useful rental property with vibrant common areas.

How do you think the pandemic has impacted the OZ industry?

The pandemic would have impacted the 180-day reinvestment window most profoundly but for IRS’ notices extending those windows multiple times was a genius move. Likewise, IRS Notice 2021-10 allows a QOF or QOZB to disregard the period between April 1, 2020 and Mar. 31, 2021 when calculating the 30-month period. A QOZB can generally hold working capital if they follow a written plan to expend the funds within 31 months. Significant delays as a result of shelter-in-place requirements could put a QOZB in jeopardy of falling outside of the 31-month working capital safe harbor. The final OZ regulations provide an automatic extension of the 31-month period of not more than 24 months if the QOZB is in a federally declared disaster area. Notice 2021-10 clarifies that such relief is available to any QOZB that holds working capital assets intended to be covered by the safe harbor before June 30, 2021, since all opportunity zones are in federally declared disaster areas effective Jan. 20, 2020. However, it’s still unclear when an extension of less than 24 months will apply. The regulations also allow a QOZB to pause its 31-month window if the project is delayed awaiting government approval. As government entities limit services, be sure to properly document project delays caused by timing of government approvals.

What achievement in this market has been most rewarding for you? Why?

Working together with my client, Brian Phillips of The Pearl Fund LP, we created the first venture capital fund that qualified as a qualified opportunity fund … though many said it could not be done!

What are your thoughts about increasing reporting requirements in the OZ space?

I believe the current reporting requirements are sufficiently comprehensive but if any increased reporting provides investors with greater confidence and reveals the benefits of the OZ program then it will be worth the extra paperwork of course. Updates are valuable because they allow investors, stakeholders and politicians to assess a program’s effectiveness and react promptly when they face serious economic setbacks or ineffectiveness.

What are your thoughts on the proposed bill to extend the OZ program to December 2028 – the Opportunity Zones Extension Act?

I am very excited about it so far. In view of the OZ program’s slow start coupled with the inactivity due to the pandemic, this profoundly vital program has much more work to do and the OZ Extension Act has the opportunity to facilitate the program’s intended purpose. If it could also create more incentives for investments in QOZ businesses and highly distressed areas then even better.

What do you think we can expect from the new Biden administration when it comes to OZs?

The Biden administration has recognized OZs as a key program in advancing economic and racial equality. U.S. Secretary of Transportation, Pete Buttigieg has already included funding preference for projects located in OZs in the $889 million Infrastructure for Rebuilding America grant program. When coupled with the potential involvement of Community Development Financial Institutions in OZ projects, it becomes evident how far the program has come since 2017 and increases the likelihood that additional federal support is on the way.

What do you think Opportunity Zones can accomplish for distressed areas?

I share the passions of so many speakers at the IRS and Treasury hearings that hoped the OZ program would lead to investment in the most distressed areas. Decades of research have shown that the US government has struggled to target programs geographically, whether TIF, enterprise zones, EB-5, etc. designed to direct economic activity to struggling areas frequently end up benefiting wealthier communities. If businesses and developers can receive the same tax or other incentives for investing in an area that is doing well versus one that is struggling, they often prefer the former so the program’s benefits flow to the least-distressed locations. Consequently, the areas that are struggling most often receive little investment. Recall the Model Cities program was the last key urban aid proposal of the Great Society of President Johnson. The legislation called for the harmonization of federal services to revitalize the U.S.’s poorest and least-served communities but failed from poor funding the combination of federal, state and city government collaboration led to competing agendas. Consider whether we should increase the tax benefit to investors for investments in areas of greater distress but care must be taken that it does not lead to unnecessary or wasteful projects. One way to avoid that I suppose is to create higher OZ tax incentives for affordable housing.

What is your favorite quote and why?

“Life is the art of drawing without an eraser.” - John W. Gardner. Why is it my favorite? Need I explain?

What is your favorite book you have read recently? Why?

I am on Chapter 58 (of a 67 chapters total – 800 pages) of Ron Chernow’s book “Washington.” He is a remarkable presidential historian and this book is incredible. It is tough to read at times as our country has had a brutal and tragic history especially reading the horrendous about slavery and related cruelty but parts are a treasure to read and so interesting. I highly recommend this book.


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