I bought land in an OZ and I want to construct a new building. What are the criteria?
Well, the first step is to buy through a QOZ entity. Once you have the legal and tax compliance set up, you can undertake basically any bona fide new development project and meet the OZ requirements. The only exception is that you can't triple-net lease the finished product.
The answer depends on whether the land is vacant or has an existing building. If the land is vacant, all improvements made to the land, including addition of new buildings or other tangible property, such as equipment or machinery, will qualify as QOZBP. If the land contains an existing building, you will need to substantially improve the property. The substantial improvement requirement will be met if, during any 30-month period beginning after the date of acquisition of the property, additions to the basis of the property exceed an amount equal to the adjusted basis of the property at the beginning of the 30-month period. You can exclude the land value when calculating the original adjusted basis at the beginning of the 30-month period. For example, say you bought the land for $1,000,000 with $500,000 of the purchase price allocated to land. You will need to substantially improve the property by $500,000 within a 30-month period to have your property considered as QOZBP.
You will need to comply with all the requirements as to investment via a QOF and then continue to be a QOZB: 70% of property, active trade or business, etc.
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