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Opportunity Zone Business (OZB)

An Opportunity Zone Business (OZB) refers to a trade or business in which substantially all of the tangible property owned or leased by the taxpayer is Opportunity Zone Business Property (OZBP) and which meets other specific requirements.

The Qualified Opportunity Zone program was created as part of the Tax Cuts and Jobs Act of 2017 to stimulate economic development and job creation in distressed communities throughout the country by providing tax benefits to investors who invest eligible capital into these communities.

To provide more detail on Opportunity Zone Businesses:

  1. Opportunity Zone Business Property (OZBP): Tangible property used in a trade or business of the QOF that (i) was acquired by the QOF by purchase after December 31, 2017; (ii) either originally used in the opportunity zone or was substantially improved by the QOF; and (iii) substantially all of the use of such property was in an opportunity zone during substantially all of the QOF’s holding period for the property.
  2. In addition to the tangible property requirement, an Opportunity Zone Business must also:
    • Derive at least 50% of its total gross income from the active conduct of a trade or business within the opportunity zone.
    • Use a substantial portion of any intangible property in such trade or business.
    • Ensure that less than 5% of the average of the aggregate unadjusted bases of its property is attributable to nonqualified financial property (like stocks, debt, partnership interests, options, futures contracts, forward contracts, etc.).
    • Not be involved in certain “sin” businesses, such as golf courses, country clubs, massage parlors, hot tub facilities, racetracks, and other forms of gambling, or stores where the principal business is the sale of alcoholic beverages for consumption off premises.

It’s important to note that the Qualified Opportunity Zone program has specific regulations and guidelines that must be followed in order to benefit from the associated tax incentives. Investors and businesses should consult with tax professionals and legal counsel familiar with the QOF industry to ensure compliance.