GEORGIA DEPARTMENT OF COMMUNITY AFFAIRS ______________________________

1. GEORGIA DEPARTMENT OF COMMUNITY AFFAIRS ______________________________ Federal Qualified Opportunity Zones FALL CONFERENCE 2018 October 10, 2018

2. Federal Opportunity Zones - Background SEC. 13823. OPPORTUNITY ZONES. (a) In General.--Chapter 1 is amended by adding at the end the following: ``Subchapter <<NOTE: 26 USC prec. 1400Z-1.>> Z--Opportunity Zones ``Sec. 1400Z-1. Designation. ``Sec. 1400Z-2. Special rules for capital gains invested in opportunity zones. ``SEC. 1400Z-1. <<NOTE: 26 USC 1400Z-1.>> DESIGNATION. ``(a) Qualified Opportunity Zone Defined.--For the purposes of this subchapter, the term `qualified opportunity zone' means a population census tract that is a low-income community that is designated as a qualified opportunity zone. ``(b) Designation.-- ``(1) In general.--For purposes of subsection (a), a population census tract that is a low-income community is designated as a qualified opportunity zone if-- ``(A) not later than the end of the determination period, the chief executive officer of the State in which the tract is located-- ``(i) nominates the tract for designation as a qualified opportunity zone, and ``(ii) notifies the Secretary in writing of such nomination, and ``(B) the Secretary certifies such nomination and designates such tract as a qualified opportunity zone before the end of the consideration period. ``(2) Extension of periods.--A chief executive officer of a State may request that ….. • The Tax Cuts and Jobs Act of 2017 created Federal Opportunity Zones • Tax benefit to incent long-term equity investments • Connect low-income communities with • capital

3. What are Federal Opportunity Zones? • Low-income community census tracts designated for investments • 25% of State’s low-income community census tracts were eligible for designation • Governor Deal approved 260 recommended census tracts that were approved by Treasury in March 2018 • Designation as Federal Qualified Opportunity Zones lasts for 10 years.

4. Incentives for Investors - Overview • Temporary Deferral on Capital Gains • Reduction in Capital Gains Liability • Tax Exemption on Gains of Opportunity Fund

5. Investor Incentive - Timeline • Year 1: Capital Gain is Invested • Year 5: 10% Step-Up in Basis • Year 7: 5% Additional Step-Up in Basis • 12/31/26: Tax on Deferred Gain is Due • Year 10: No Tax on Post Acquisition Appreciation

6. What are Opportunity Funds? • Investment vehicles organized as corporations or partnerships • Flexible structure • Self certified (Subject to further Treasury guidance) • Must invest 90% of their assets in federal qualified opportunity zone property

7. Types of Opportunity Funds • National or Local • Specialized or Diversified • Closely-held or Professionally Managed • Single Project or Portfolio of Projects

8. What is Qualified Opportunity Zone Property? Three types of eligible investments: • Stock of a qualified opportunity zone corporation • Partnership interest in a qualified opportunity zone partnership • Business property used in a qualified opportunity zone

9. Diversity of Investments • Business Ventures • Affordable Housing Projects • Commercial Development

10. Going Forward • 260 Zones Certified in Georgia • DCA website https://dca.ga.gov/community-economic-development • Federal Opportunity Zone Meeting in Atlanta • October 30, The Loudermilk Center, 7:00 a.m. – 11:45 a.m. • Further guidance from IRS/Treasury – Q4 of 2018? • 2019 – Opportunity Funds Establish and Investments Flow • 2020 + 2021 – Funds Reach 90% Thresholds

11. General Thoughts on Federal Opportunity Zones Comments and Questions

12. Contact information Holly Hunt, FOZ Coordinator (404) 679-3144 holly.hunt@dca.ga.gov FederalOZ@dca.ga.gov www.dca.ga.gov Community & Economic Development Federal Qualified Opportunity Zones