Opportunity Zones and Opportunity Funds

When the Tax Cuts and Jobs Act was signed into law in late December 2017, an important investment tool was created, offering significant federal income tax incentives for investors to provide capital to operating businesses and for real estate development — called Opportunity Zones. Specifically, Opportunity Zones are designed to encourage investment of private capital into newly formed investment entities (Opportunity Funds) which will deploy the invested capital into businesses located in and real estate development occurring within certain designated areas throughout the country (approximately 8,700 different population census tracts).

Opportunity Zones offer taxpayers significant federal income tax incentives for investing in Opportunity Funds, including the long-term deferral and partial reduction of gain from the sale of an asset where the gain proceeds are reinvested in an Opportunity Fund. However, the most notable federal income tax incentive is the exclusion of income from taxation on an investor’s appreciation of his or her interest in the Opportunity Fund where the investor holds such investment for a certain period of time.

At Snell & Wilmer, we have an interdisciplinary team of attorneys from across all of our offices who have a strong understanding of this complex, but attractive program. Our team of attorneys has provided thought leadership in a number of policy and substantive areas with respect to the Opportunity Zone incentive at both the local, state, and national level. Our team has also provided technical advice for, and drafted, a number of comment letters submitted to the U.S. Treasury Department and the Internal Revenue Service with respect to the Opportunity Zone regulations. We have been regular speakers at various national and regional conferences and have authored a number of substantive articles regarding this subject matter area.

We have been advising third party sponsors and vertically integrated developers with respect to forming and structuring Opportunity Funds and the deployment of capital by the Opportunity Funds. Many of our representations involve the negotiation of joint venture arrangements with other Opportunity Funds. We are also currently representing operating companies that are using this incentive to raise capital. Our team is well-versed in using the Opportunity Zone incentive with respect to Native American transactions involving ground leasing, acquisition-rehabilitation transactions, multi-phased development, and legacy held real estate. Additionally, our team advises clients regarding ongoing compliance issues related to this incentive.

New Markets Tax Credit Experience

Opportunity Zones is a federal incentive with similarities to the federal New Markets Tax Credit (NMTC) program. Having a legal advisor who understands the limitations and compliance issues with respect to NMTCs can be a prerequisite for success in this new area. At Snell & Wilmer, we have an established and robust NMTC practice from a tax, commercial finance and corporate compliance perspective, and we regularly issue written tax opinions in the NMTC area. We also have significant experience with structuring complex transactions from a tax and financing perspective – which is necessary for deployment of capital by an Opportunity Fund. Accordingly, we remain well-positioned to repre\sent investors, fund sponsors, lenders, and both businesses and real property owners located in Opportunity Zones.

Our Opportunity Zones and Opportunity Funds attorneys serve clients in the areas of: real estate investment and development, mergers and acquisitions, complex lending, community and economic development, tax credit financing, and high-net-worth investing across the United States. We have more than 150 attorneys practicing in our offices in Arizona, California, Colorado, Nevada, and Utah in the areas of:

• Real Estate
• Corporate and Securities
• Commercial Finance
• Tax
• Construction and Zoning
• Infrastructure Development and Project Finance
• Fund Formation and Investment
• Private Client Services

In addition, we serve a broad array of clients, including individuals, families, fiduciaries, publicly traded and closely held businesses, national and regional lenders, nonprofit organizations, and international corporations.

With more than 450 attorneys in 15 locations throughout the United States and in Mexico, Snell & Wilmer can quickly mobilize cross-disciplinary teams to react to changes in government, law and regulation, as we have in consolidating our practice group for Opportunity Zones and Opportunity Funds. We draw upon the full experience of attorneys in our firm in order to fully benefit our clients.