Public and Private Financing for Opportunity Zone Investment Properties

What does public and private financing for Opportunity Zone investment properties encompass?

Opportunity Zones, established by the Tax Cuts and Jobs Act of 2017, incentivize investment in economically distressed areas. In Florida, public and private financing sources for Opportunity Investment properties include government grants, tax credits, and private capital from investors.

The Florida Housing Finance Corporation offers the State Housing Initiatives Partnership (SHIP) program, which provides funds to local governments for affordable housing projects. In addition, the New Markets Tax Credit (NMTC) program, a federal initiative, also allows investors to receive tax credits for equity investments in Community Development Entities (CDEs) that finance businesses in low-income communities.

Private financing sources for Opportunity Investment properties consist of individual investors, real estate investment trusts (REITs), and private equity funds. These entities invest in Qualified Opportunity Funds (QOFs), investment vehicles designed to finance projects in Opportunity Zones.

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Which laws and regulations apply to public and private financing for Opportunity Zone investment properties in Florida?

Florida and federal laws and regulations guide public and private financing for Opportunity Investment properties. On the federal level, 26 U.S. Code § 1400Z-2 outlines the tax benefits and requirements for investing in Opportunity Zones through QOFs. Furthermore, the Internal Revenue Service (IRS) provides further guidance on the program’s implementation and compliance, including 26 CFR § 1.1400Z2.

In Florida, the Florida Statutes Chapter 420 governs affordable housing, while the Florida Administrative Code Chapter 67-48 provides rules for the state’s housing finance programs, including the SHIP program. Additionally, local governments may have specific ordinances and regulations addressing Opportunity Zones and affordable housing projects within their jurisdictions. Therefore, developers and investors must ensure compliance with all applicable laws and regulations when seeking public and private financing for Opportunity Investment properties in Florida.

What are the strategic benefits of obtaining public and private financing for Opportunity Zone investment properties?

Investors may benefit from the following:

• Tax incentives: The Tax Cuts and Jobs Act of 2017 provides significant tax incentives, such as deferred taxes on capital gains, reduced tax liabilities, and tax-free appreciation for long-term investments in Opportunity Zones.
• Community impact: By investing in economically distressed areas, investors can contribute to community revitalization, create jobs, and stimulate local economies, ultimately aligning financial returns with positive social impact.
• Portfolio diversification: Opportunity Zone investments can diversify investors’ portfolios by adding exposure to different asset classes and geographic regions within Florida and the country.
• Public-Private Partnerships: Investors can leverage public financing options, such as the SHIP program and the NMTC program, to attract additional private capital, mitigate risk, and potentially enhance overall returns.
• Access to capital: Private financing sources like individual investors, REITs, and private equity funds offer Opportunity Zone projects access to a broad pool of money, increasing the likelihood of securing the necessary funding.
• Long-term growth potential: Investors who hold their Opportunity Zone investments for at least ten years can benefit from tax-free appreciation, encouraging long-term commitment and fostering sustainable growth in these areas.

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 public and private financing for Opportunity Zone investment properties?

Counsel should consider the following to protect their clients:

• Research: Thoroughly research federal and state legislation, regulations, and programs relevant to Opportunity Zones.
• Identify financing sources: Identify potential public and private financing sources, such as government grants, tax credits, individual investors, REITs, and private equity funds, and determine their requirements and preferences.
• Develop a comprehensive investment strategy: Craft a detailed investment strategy that includes risk management, growth potential, and community impact, demonstrating the project’s alignment with the goals of public and private financiers.
• Ensure compliance: Ensure compliance with all federal, state, and local laws, regulations, and ordinances, including tax reporting and filing, environmental rules, and affordable housing guidelines.
• Prepare documentation: Compile necessary documentation, such as business plans, financial projections, and legal agreements, to support the financing application and investment proposal.
• Build relationships: Establish and maintain relationships with key stakeholders, including government agencies, community organizations, investors, and other industry professionals, to enhance credibility and facilitate the financing process.

• Monitor progress and maintain communication: Regularly monitor the progress of the investment and maintain open communication with financiers, providing updates on project milestones, financial performance, and community impact.

• Leverage success stories: Showcase successful projects and investments in other Opportunity Zones to demonstrate the potential for financial and socially positive outcomes.
• Stay informed: Keep up-to-date with changes in federal and state laws, regulations, and programs related to Opportunity Zones and financing options, ensuring compliance and maximizing available incentives for investors.

• Optimize investment structure: Structure investments in a way that maximizes tax benefits and aligns with the requirements of public and private financiers. This may include forming Qualified Opportunity Funds, optimizing holding periods, and utilizing debt financing to enhance returns.

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 are some familiar public financing sources for Opportunity Investment properties in Florida?

Public financing for Opportunity Investment properties in Florida typically comes from federal and state programs, such as the NMTC program, Community Development Block Grants (CDBG), and Florida-specific programs like the Florida Small Business Loan Support Program and the Florida Microfinance Guarantee Program.

2. How does private financing for Opportunity Investment properties differ from public financing?

Private financing for Opportunity Investment properties typically comes from private investors, banks, or financial institutions, and it may involve equity investments, debt financing, or a combination of both. Unlike public funding, which is generally subject to government regulations and eligibility criteria, private financing usually derives from market-driven factors, such as risk tolerance, investment objectives, and the potential for financial returns.

3. Can Opportunity Zone investments be combined with other federal or state incentives?

Yes, Opportunity Zone investments can often combine with other federal and state incentives to maximize the benefits for investors and communities. For example, Section 42 of the Internal Revenue Code allows investors to claim a Low-Income Housing Tax Credit for qualifying investments in affordable housing, which can be paired with Opportunity Zone investments to enhance the overall tax benefits and financial returns for investors.

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

Crucially, this overview of public and private financing for Opportunity Zone investment properties 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.