South Florida real estate is on the verge of a new wave of investment. Opportunity zones, “economically-distressed communit[ies] where new investments . . . may be eligible for preferential tax treatment,” are ripe for investors, and Miami-Dade has had 68 such zones nominated and certified by the U.S. Secretary of the Treasury and the Internal Revenue Service.
The Qualified Opportunity Zones (QOZ) program was established as part of the 2017 Tax Cuts and Jobs Act. The program allows investors to delay paying capital gains taxes and reduce the amount of tax due, so long as those gains are rolled over into a fund that invests in economically distressed communities and held for a certain time period. The longer an investment is held, the greater the benefit. If a person holds his or her interest in the fund for 10 years, then sells at a profit, he or she can pay no tax at all on those gains.
The program allows states to establish opportunity zones in lower-income communities and disadvantaged “zones” following the parameters created by the federal government. The program went into effect this past summer, but the Treasury Department and IRS need to issue additional guidelines to clarify the rules regarding investment funds and partnerships, among other things. As of today, 8,700 tracts in the United States were designated as opportunity zones.
The main type of investment vehicle for these transactions has been defined as a Qualified Opportunity Fund. “A Qualified Opportunity Fund is . . . set up either as a partnership or corporation for investing in eligible property . . . located in a Qualified Opportunity Zone.”
If you are an individual looking to invest, you can do so either “via a fund structure that pools money from several investors together, or as a sole investor. . . .Real estate developers and business owners may be inclined to invest on their own to maintain the most control over their investment.” Individuals and families looking to sell stocks with very low cost bases or seeking to sell businesses or real estate may also be interested in investing in these funds as a means of tax avoidance.
The intent of the program is to allow individuals and partnerships to invest in or create Qualified Opportunity Funds to invest in low-income or abandoned areas to create businesses and stimulate job growth. However, some warn that it might have the unintended consequence of gentrifying residents out of their neighborhoods.
[The Urban League’s] Smith-Baugh hopes the program will lure the right type of impact investors . . . who will work to create neighborhoods with workforce housing and transit, yet not displace existing local businesses. “We would like to see organization that can aggregate potential projects and make the residents and businesses feel as though they are part of the process.”
As of now, lawyers, accountants, investment fund managers and U.S. and foreign investors are waiting for the Treasury to fire the starting gun. When it goes off, we will most likely see a mad dash among investors to grab up these properties. Stay tuned for more information about QOZs and their legal and tax implications.
 Internal Revenue Service, “Opportunity Zones Frequently Asked Questions,” available at https://www.irs.gov/newsroom/opportunity-zones-frequently-asked-questions.
 Id. The State of Florida has 427 such tracts certified as opportunity zones.
 Funcheon, D., “South Florida Investors Get in Position for Opportunity Zones,” Bisnow.com (Sept. 5, 2018), available at https://www.bisnow.com/south-florida/news/land/opportunity-zones-florida-92435.
 Pantekidis, J., “Tax Benefits of the Opportunity Zone Program for High-Net-Worth Individuals,” Forbes.com (Oct. 3, 2018), available at https://www.forbes.com/sites/johnpantekidis/2018/10/03/tax-benefits-of-the-opportunity-zone-program-for-hnwis/#7a877c774ed4.
 See N. 1, supra. In addition, investors do not have to reside in the same state as the opportunity zone in order to reap the tax benefits.
 Schultz, A., “Opportunity Zone Funds to Deliver a Tax Break,” Barrons.com (Oct. 4, 2018), available at https://www.barrons.com/articles/opportunity-zone-funds-to-deliver-a-tax-break-1538680532.
 See N. 3, supra.