The Tax Cuts and Jobs Act enacted section 1400Z-2 of the Internal Revenue Code, which created the qualified opportunity zone program. The program is designed to encourage investment in distressed communities designated as “qualified opportunity zones” by providing tax incentives to invest in “qualified opportunity funds” (“opportunity funds”) that, in turn, invest directly or indirectly in the opportunity zones.

The qualified opportunity zone program generally offers three potential tax benefits to investors:

First, a taxpayer may elect to defer tax on capital gain from the sale or exchange of property with an unrelated person by investing the gain as equity in an opportunity fund within 180 days after the sale or exchange.  The deferral ends on December 31, 2026, or sooner if the taxpayer sells its interest in the opportunity fund, and at that time the taxpayer must recognize the gain (and pay tax) with respect to the original property.

Second, if the taxpayer holds its interest in an opportunity fund for five years, it can step up its basis in the opportunity fund by an amount equal to 10% of the deferred gain with respect to the original property and, if the taxpayer holds its interest in the opportunity fund for seven years, it can step up its basis in the opportunity fund by an amount equal to an additional 5% of the deferred gain with respect to the original property (for a total of 15%). The stepped up basis reduces the amount of gain recognized by the taxpayer at the end of the deferral period.

Finally, if the taxpayer holds its interest in the opportunity fund for at least 10 years, it can step up its basis in its interest in the opportunity fund to the fair market value of the interest on the date the interest is sold (enabling the taxpayer to eliminate income tax on any post-acquisition capital gain in its opportunity fund interest, including any capital gain attributable to leverage incurred by the fund).

An in depth discussion of the opportunity zone program and the proposed regulations can be found here: https://www.proskauer.com/report/irs-and-treasury-issue-proposed-opportunity-zone-regulations.

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Photo of David S. Miller David S. Miller

David Miller is a partner in the Tax Department. David advises clients on a broad range of domestic and international corporate tax issues. His practice covers the taxation of financial instruments and derivatives, cross-border lending transactions and other financings, international and domestic mergers and acquisitions, multinational corporate groups and partnerships, private equity and hedge funds, bankruptcy and workouts, high-net-worth individuals and families, and public charities and private foundations. He advises companies in virtually all major industries, including banking, finance, private equity, health care, life sciences, real estate, technology, consumer products, entertainment and energy.

David is strongly committed to pro bono service, and has represented more than 200 charities. In 2011, he was named as one of eight “Lawyers Who Lead by Example” by theNew York Law Journal for his pro bono service. David has also been recognized for his pro bono work by The Legal Aid Society, Legal Services for New York City and New York Lawyers For The Public Interest.

Jean Bertrand

Jean Bertrand is a senior counsel in the Tax Department.

Sejin Park

Sejin Park is an associate in the Tax Department. Sejin’s practice focuses on advising clients on tax matters in domestic and cross-border transactions related to capital markets, finance, mergers & acquisitions and bankruptcy.

Photo of Mitchell Gaswirth Mitchell Gaswirth

Mitchell M. Gaswirth is a partner in the Tax Department. His practice focuses primarily on income, gift and estate tax and related business planning. Mitchell counsels individuals, entrepreneurs and business entities in connection with the various income and other tax issues which arise in sophisticated business transactions.

Mitchell’s practice also encompasses a wide array of merger and acquisition, business formation and financing, debt restructuring, and real property acquisition, disposition and exchange transactions. His knowledge encompasses the complex and often arcane application of California’s property tax regime (“Proposition 13”) in a variety of business transactions directly or indirectly involving California real property.

Photo of Martin T. Hamilton Martin T. Hamilton

Martin T. Hamilton is a partner in the Tax Department. He primarily handles U.S. corporate, partnership and international tax matters.

Martin’s practice focuses on mergers and acquisitions, cross-border investments and structured financing arrangements, as well as tax-efficient corporate financing techniques and the tax treatment of complex financial products. He has experience with public and private cross-border mergers, acquisitions, offerings and financings, and has advised both U.S. and international clients, including private equity funds, commercial and investment banks, insurance companies and multinational industrials, on the U.S. tax impact of these global transactions.

Photo of Malcolm Hochenberg Malcolm Hochenberg

Malcolm S. Hochenberg is a senior counsel in the Tax Department. Malcolm has a broad practice, including inbound and outbound mergers and acquisitions, capital markets transactions, financial products, cross-border investments (with some emphasis on joint ventures involving intellectual property and other businesses) and tax controversies. Malcolm represents public companies, closely-held companies, asset managers and high-net-worth individuals.

In 2013, Malcolm was the chairperson of “Under 10,” which is the New York State Bar Association Tax Section’s group for lawyers with ten years or less of practice experience. In 2014, Malcolm co-authored a report to the IRS and Treasury Department on certain “partnership built-in loss” regulations prepared under the auspices of the NYSBA Tax Section.

Photo of Amanda H. Nussbaum Amanda H. Nussbaum

Amanda H. Nussbaum is a partner in the Tax Department and also is a member of the Private Investment Funds Group. Her practice concentrates on planning for and the structuring of domestic and international private investment funds, including venture capital, buyout, real estate and hedge funds, as well as advising those funds on investment activities and operational issues. She also represents many types of investors, including tax-exempt and non-U.S. investors, with their investments in private investment funds.

Amanda has significant experience structuring taxable and tax-free mergers and acquisitions, real estate transactions and stock and debt offerings. She also counsels both sports teams and sports leagues with a broad range of tax issues.

Photo of Jamiel E. Poindexter Jamiel E. Poindexter

Jamiel E. Poindexter is a partner in the Tax Department and a member of the Private Investment Funds Group. He focuses on tax and economic issues associated with the formation of and investments in U.S. and non-U.S. venture capital funds, buyout funds, funds-of-funds, secondary funds, and other investment partnerships.

Jamiel advises U.S. and non-U.S. sponsors and institutional investors on all types of fund-related transactions and operations.