A Qualified Opportunity Zone Business (QOZB) is an operating company or property-owning entity located in an Opportunity Zone. Many Qualified Opportunity Funds (QOFs) do not own property directly. Instead, they invest through a QOZB.
Key Points
- Asset tests: A QOF must hold at least 90% of its assets in qualifying Opportunity Zone property, while a QOZB must have at least 70% of its tangible property in a zone and earn at least half of its gross income from business conducted there.
- Working capital: A QOZB can hold cash for up to 31 months under a written plan to build or improve property, which gives development projects time to put capital to work.
- Real estate or a business: Some sponsors use the QOZB to own and develop real estate; others build an operating business inside a zone, such as manufacturing, logistics, or secure storage.
- Excluded businesses: Certain businesses, including golf courses, country clubs, gambling facilities, and liquor stores, cannot qualify.
When evaluating a QOF, ask what the QOZB owns or operates, how it plans to meet these tests, and what happens to the tax benefits if it falls short. To learn more, see how SREI Group approaches these investments.
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