Is Opportunity Zone Investing Attractive to Wealthy Investors?

An Article by Daniel Pessar

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In the media, in state capitals, and even in Congress, the super-rich are frequently cited as the biggest economic winners from the opportunity zone laws passed as part of the 2017 Tax Cuts and Jobs Act. Although high net worth investors can access the tax benefits more easily than others can, a closer look at the law and regulations reveal that the wealthiest taxpayers are usually less incentivized than other wealthy investors to participate in Qualified Opportunity Zone (QOZ) investing. The QOZ tax benefits are significant, promising capital gains tax exclusion on new QOZ investments. But high net worth investors have more access than others to indefinite deferral mechanisms, making capital gains exclusion less valuable. QOZ investments requires capital gains realization and, by tax year 2026, capital gains recognition, presenting current costs in exchange for future tax benefits mostly available ten years after the investment is made. Even though the QOZ laws are designed to provide tax benefits to any investor with capital gains, the investors best-positioned to benefit are those with realized gains who lack access to indefinite capital gains deferral. And in the current low tax and low interest rate environment, even those investors may not find QOZ investing attractive.