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Case Study

As of 2019, Full court development is a certified, qualified opportunity Zone
fund. unlocking economic growth and potential in underinvested neighborhoods.

Qualified Opportunity Zones: What are they and what do they mean for Philadelphia? 

The Tax Cuts and Jobs Act of 2017 passed by Congress created the concept of Qualified Opportunity Zones (QOZ), a tax incentive tool to encourage long-term investments in low-income urban and rural neighborhoods across the country. 
 

Qualified Opportunity Zones: What are they and what do they mean for Philadelphia?

QOZs provide a tax incentive for investors to re-invest their unrealized capital gains (e.g., the sale of real estate, stock, a business) into real estate projects that meet certain parameters. 
 

Qualified Opportunity Zones in Philadelphia 

Across the United States, approximately 9,000 census tracts were designated by the Treasury as QOZs. Within the Philadelphia Region, 300 tracts of land in Pennsylvania and 169 tracts in New Jersey were designated as QOZs. Within the five counties located in Southeastern Pennsylvania, 98 QOZs were identified. In the eight South Jersey counties, 48 QOZs were named.  

Qualified Opportunity Zones at Full Court Development

 In addition, as of 2019, we are a Qualified Opportunity Zone (QOZ) entity that is looking to match capital with returns in traditionally underinvested neighborhoods/projects. We are fortunate enough to have already been active in what are now considered “Qualified Opportunity Zones” neighborhoods like Brewerytown and West Philadelphia. The QOZs provide a tax incentive for investors to re-invest their unrealized capital gains (e.g., the sale of real estate, stock, a business) into real estate projects that meet certain criteria.

The key criterion of realizing the benefit of the QOZ is that the capital must be invested for 10 years in order to realize those gains and when it comes to “emerging” neighborhoods patience is key. More directly, because their is the attractive tax benefit, the investor can earn a lower return on their investment then they would typically require without the QOZ status.

Tax Incentives 

Since the opportunity zones are designated to spur economic development by providing tax benefits to investors, the Treasury Department is working on specific rules to give businesses flexibility, as well as the certainty to make major investments. 

Real estate developers and investors who qualify for the incentive will receive two benefits: 

  1. Investors can defer tax on any prior gains invested in a Qualified Opportunity Fund (QOF) until the earlier of the date on which the investment in a QOF is sold or exchanged, or December 31, 2026. If the QOF investment is held for longer than 5 years, there is a 10% exclusion of the deferred gain. If held for more than 7 years, the 10% becomes 15%. 
  2.  If the Investor holds the investment in the Opportunity Fund for at least ten years, the investor is eligible for an increase in basis of the QOF investment equal to its fair market value on the date that the QOF investment is sold or exchanged. 

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