Opportunity Zone Property Transactions

What do Opportunity Zone property transactions encompass? 

Opportunity Zone property transactions involve transferring, leasing, or using real estate within designated Opportunity Zones established under the Tax Cuts and Jobs Act of 2017. These transactions occur within economically-distressed communities, intending to incentivize investment and promote economic growth. Opportunity Zone property transactions in Florida include sale, lease, purchase, and easement agreements. 

A sale agreement transfers property ownership from one party to another, while a lease agreement grants temporary usage rights to a tenant. Purchase agreements outline the terms and conditions for acquiring a property, including the price, contingencies, and closing process. Easement agreements, on the other hand, grant specific usage rights to a non-owner, such as utility companies or neighboring property owners. 

For example, an investor may purchase a commercial property within an Opportunity Zone in Florida, lease the property to a business, and receive tax benefits for their investment under federal and state law. This transaction would involve both purchase and lease agreements. 

Need an Opportunity Zone advocate? Schedule your consultation today with a top Opportunity Zone investing attorney.  

Which laws and regulations apply to Opportunity Zone property transactions in Florida? 

Opportunity Zone property transactions in Florida are subject to federal and state laws and regulations. The  Tax Cuts and Jobs Act of 2017 established the program and its tax incentives. The Internal Revenue Service (IRS) provides additional guidance through regulations and frequently asked questions. 

The Florida Statutes govern real estate transactions at the state level, including those within Opportunity Zones. Title XL of the Florida Statutes contains real and personal property provisions, such as sale agreements, lease agreements, purchase agreements, and easement agreements. For example, Chapter 689 addresses real estate conveyances, while Chapter 695 focuses on the recordation of instruments. 

Investors, property owners, and developers should consult federal and state laws and regulations to ensure compliance when participating in Opportunity Zone property transactions in Florida. 

What are the strategic benefits of Opportunity Zone property transactions?  

Investors may benefit from the following:  

• Tax advantages: Opportunity Zone investments offer significant tax benefits for investors, including deferral of capital gains taxes, a step-up in basis for reducing the amount of taxable gains, and the potential for tax-free appreciation on investments held for at least ten years. 
• Economic growth: Investing in Opportunity Zone properties revitalizes economically distressed communities, promoting job creation and economic development, increasing property values and investment returns. 
• Diversification: Including Opportunity Zone property transactions in an investment portfolio provides exposure to different asset classes and geographic areas, helping investors to spread risk and achieve a more balanced portfolio. 
• Social impact: Investors can have a meaningful impact on local communities by supporting businesses and projects that create jobs, improve infrastructure, and enhance residents’ overall quality of life. 
• Access to government incentives: Investing in Opportunity Zone properties can make projects eligible for additional federal, state, and local incentives, such as grants, low-interest loans, and infrastructure improvements, further enhancing the potential return on investment. 

Please contact our office to set up your initial consultation to determine whether Opportunity Zone investment services may be available for your unique situation. 

What steps should counsel take to facilitate Opportunity Zone property transactions?  

Counsel should consider the following to protect their clients:  

• Research and due diligence: Counsel should perform thorough due diligence on the property, location, and eligibility for Opportunity Zone benefits. 
• Structure the investment: Counsel should help investors structure their investment in a tax-efficient manner, such as establishing a Qualified Opportunity Fund (QOF) or investing through an existing QOF.  
• Draft and review transaction documents: Counsel should draft and review all transaction documents, including sale agreements, lease agreements, purchase agreements, and easement agreements, ensuring that they reflect the terms of the deal and comply with applicable laws and regulations. 
• Coordinate with other professionals: Counsel should collaborate with other professionals, such as accountants, financial advisors, and real estate brokers, to ensure a seamless transaction process and maximize tax benefits and investment returns. 
• Monitor ongoing compliance: To maintain eligibility for Opportunity Zone tax benefits, counsel should help investors monitor continuous compliance with federal and state requirements, including the QOF’s investment standards, property improvement requirements, and reporting obligations. 
• Advise on exit strategies: Counsel should guide potential exit strategies, such as the sale or refinancing of the property, to maximize tax benefits and investment returns while minimizing potential liabilities. 

When a set of facts is appropriate for legal intervention, there are many paths a claimant may take. We are value-based attorneys at Jimerson Birr, which means we look at each action with our clients from the point of view of costs and benefits while reducing liability. Then, based on our client’s objectives, we chart a path to seek appropriate remedies. 

To determine whether your unique situation may necessitate litigation or another form of specialized advocacy, please contact our office to set up your initial consultation. 

Frequently Asked Questions 

1. What types of properties qualify for Opportunity Zone investments? 

Any property type, such as commercial, residential, or industrial, can qualify for Opportunity Zone investments if located within a designated Opportunity Zone. However, the investment must also meet the substantial improvement test outlined by the IRS, which requires that the cost of improvements to the property exceeds the initial cost of the property within 30 months. 

  2. How do I find designated Opportunity Zones in Florida? 

Using the federal Opportunity Zones map, you can find designated Opportunity Zones in Florida. This tool provides an up-to-date visual representation of Opportunity Zones within the state and allows users to search for specific locations or areas. 

  3. What happens if my investment in an Opportunity Zone property does not meet the substantial improvement test? 

If your investment in an Opportunity Zone property fails to meet the substantial improvement test, it will not qualify for the tax benefits associated with Opportunity Zone investments. This issue may result in a loss of deferred capital gains tax benefits, a step-up in basis, and tax-free appreciation on the investment. Therefore, working with legal counsel and other professionals is essential to ensure compliance with the substantial improvement test and other IRS requirements. 

Have more questions about how Opportunity Zone investing could impact you?  

Crucially, this overview of Opportunity Zone property transactions does not begin to cover all the laws implicated by this issue or the factors that may compel the application of such laws. Every case is unique, and the laws can produce different outcomes depending on the individual circumstances. 

Jimerson Birr attorneys guide our clients to help make informed decisions while ensuring their rights are respected and protected. Our lawyers are highly trained and experienced in the nuances of the law, so they can accurately interpret statutes and case law and holistically prepare individuals or companies for their legal endeavors. Through this intense personal investment and advocacy, our lawyers will help resolve the issue’s complicated legal problems efficiently and effectively. 

Having a Jimerson Birr attorney on your side means securing a team of seasoned, multi-dimensional, cross-functional legal professionals. Whether it is a transaction, an operational issue, a regulatory challenge, or a contested legal predicament that may require court intervention, we remain tireless advocates at every step. Being a value-added law firm means putting the client at the forefront of everything we do. We use our experience to help our clients navigate even the most complex problems and come out the other side triumphant. 

If you want to understand your case, the merits of your claim or defense, potential monetary awards, or the amount of exposure you face, you should speak with a qualified Jimerson Birr lawyer. Our experienced team of attorneys is here to help. Call Jimerson Birr at (904) 389-0050 or use the contact form to schedule a consultation.