What happens to the investments in my OZ business if it grows to the point that I want to move it outside of the OZ?

Answers

• 

  Jonathan McGuire

  Aldrich CPAs and Advisors

  December 04, 2019

  You still have to meet the income and asset tests. 50% of the income must be generated from work done inside a zone. 70% of the assets must also be qualified. However, tangible property (equipment) that ceases to be a qualified Opportunity Zone business property shall continue to be treated as a qualified Opportunity Zone business property for the lesser of 5 years after the date on which such tangible property ceases to be so qualified, or the date on which such tangible property is no longer held by the qualified Opportunity Zone business. It is, therefore, possible to have qualified OZ property outside of a zone, expand your business, etc, but you must still maintain a significant presence inside a zone.

• 

  Timothy Wachter

  Knox McLaughlin Gornall and Sennett

  December 04, 2019

  Investors could lose the tax-advantaged nature of the investment.

• 

  Matthew Rappaport

  Falcon Rappaport & Berkman

  December 05, 2019

  Moving the business outside of an OZ renders the entity's property ineligible for treatment as QOZBP, which likely disqualifies the QOZB and QOF from the tax benefits under the program. So if you haven't hit your ten-year holding period, moving outside of an OZ will present insurmountable compliance issues.

• 

  Maria De Los Angeles Rivera

  Kevane Grant Thornton

  December 06, 2019

  If the business fails the tests that it must comply with, specifically the 70% tangible property located in a zone and the 50% gross income derived in a zone. The investment could be disqualified if the fund does not meet the 90% investment test.

• 

  Brad Cohen

  Jeffer Mangels Butler & Mitchell

  December 07, 2019

  If it falls outside an Opportunity Zone, then you are out of the program. Depending on how long you were in, you may or may not be taxed.

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