A Qualified Opportunity Fund (QOF) can invest in a variety of assets, primarily within designated Opportunity Zones. These investments are aimed at promoting economic growth and development in these areas. The main types of assets a QOF can invest in include:
- Qualified Opportunity Zone Property (QOZP): This refers to tangible property used in a trade or business within an Opportunity Zone. To qualify as QOZP, the property must be acquired after December 31, 2017, and either its original use begins with the QOF or it must be substantially improved by the QOF.
- Qualified Opportunity Zone Stock (QOZS): This includes stocks in domestic corporations that are qualified Opportunity Zone businesses. The corporation must be organized for the purpose of conducting a trade or business within an Opportunity Zone and must meet certain criteria throughout the holding period.
- Qualified Opportunity Zone Partnership Interests (QOZPI): These are capital or profits interests in a domestic partnership that operates a qualified Opportunity Zone business. Similar to QOZS, the partnership must be organized for conducting a trade or business within an Opportunity Zone and meet specific criteria during the holding period.
- Qualified Opportunity Zone Business (QOZB): A QOF can directly invest in a QOZB, which is a trade or business in which substantially all of the tangible property owned or leased is QOZP. The business must also meet several requirements, such as generating at least 50% of its income within the Opportunity Zone and having a substantial portion of its intangible property used in the active conduct of the business.
It’s important to note that a QOF must hold at least 90% of its assets in the aforementioned qualified Opportunity Zone properties, stocks, partnership interests, or businesses. Additionally, certain “sin businesses” are excluded from being eligible QOZBs, such as golf courses, country clubs, casinos, and liquor stores.