Welcome to OZ Colorado

I sat down with a group of investor friends and asked them “what is it you truly need to know about the 126 Colorado Opportunity Zones and the generational tax benefits for investors?””Everything” they replied. This website is full of answers to all those countless questions we have about how Opportunity Zones work and how we can reduce and eliminate capital gains tax on our Opportunity Zone investments. 

Join The Colorado OZ Community

Opportunity Zones were created across the US as a social impact initiative with substantial tax benefits for investors willing to reinvest into designated underserved communities.

Colorado is participating in the program and has designated 126 Opportunity Zones.

We set up the OZ Colorado Community Portal to give you all the tools and resources you need to understand and invest in a Colorado Opportunity Zone.

If you haven’t done so yet, join the COZ Portal. 

It’s free and we’ll let you in on a local secret –  it’s where we hide all the really good stuff. 

Member Login

Opportunity Zone Guide 101

Start by reading through the Opportunity Zones Introductory Guide to understand the broad strokes of the Opportunity Zone program and how you can participate in the program’s tax benefits. 

At the bottom of the page there is a link to get the full in-depth guide.

Opportunity
Zones

There are over 8700 Opportunity Zones (OZs or O-Zones) located throughout the US where investors receive preferred tax treatment on capital gains that are reinvested into a business or real estate located within an OZ.

The tax incentive is a generational offer to defer, reduce and eliminate capital gains tax. It is limited to capital gains but allows reinvestment of capital gains from not just real estate but also the sale of stocks, bonds and business interests.

 

Colorado Opportunity Zones

There are 126 Opportunity Zones in Colorado, located throughout the Front Range and in a number of rural Counties. 

Zones were selected to be both attractive to investors and to spur economic growth in selected communities, including communities identified as high growth areas for Colorado’s rapidly growing population.

As an investor, you’re going to love the location of some of the Opportunity Zones.

Businesses &
Real Estate

Investments can be made into new and existing businesses and real estate located within an Opportunity Zone.

The legislation requires investment through a Qualified Opportunity Fund (QOF) and encourages starting new businesses and real estate developments. It also incentivizes investing capital into the growth and expansion of existing businesses as well as the renovation and improvement of existing real estate.

Limited To Capital Reinvestment

One of the major limitations of the Opportunity Zone program is that it is limited to the reinvestment of capital gains. Ordinary equity and debt investments are excluded from the program. 

In practice this requires investors to first sell a capital asset and then reinvest the gain, within a defined time period, into a qualified investment. Unlike a 1031 exchange that is limited to real estate, the investor can sell almost any capital asset, including shares.

Limited To Qualified Opportunity Zones

A second major limitation of the Opportunity Zone program is that it is limited to investment within a Qualified Opportunity Zone. 

This is a simple determination for real estate investments but it can become complicated when dealing with an investment in a qualified business that is located within a Qualified Opportunity Zone but transacts outside of the zone.

Limited To Qualified Investments

A third major limitation of the Opportunity Zone program is that it is limited to investments that qualify as an Opportunity Zone Property or Business.

The Opportunity Zone Property or Business may be a new or existing business. If the property or business is an existing one then there is a requirement to improve the property or grow the business.

Qualified Opportunity Funds

Qualified Opportunity Funds (QOFs) are a new class of investment vehicles created for investment into the Opportunity Zone program. Investors are required to invest capital gains into a QOF and the QOF then invests into a Qualified Opportunity Zone Property or Business (QOZP or QOZB).

It sounds complicated but anyone can set up a QOF. You can set up your own fund or you can invest passively into an institutional fund organized by a developer or financial institution. The  QOF must be organized as a corporation or partnership (certain LLC’s are OK) for the purpose of investing in the Opportunity Zone program and self-certifies as a QOF. 

Already Attracted Billion Dollar Funds

CIM Group

Announced new $5 Billion Opportunity Zone Fund to compliment the $3 Billion already invested in Opportunity Zones.

Starwood Capital

Hotel Group already has 58 Properties in Opportunity Zones and now announced a new Opportunity Fund

Cadre Platform

Jared Kushner founded real estate crowdfunding platform announced a number of Opportunity Funds. It's the President's son-in-law - #justsayin

Generational Tax Incentives

The Opportunity Zone program provides generational tax incentives to encourage investors to activate and reinvest capital gains into new long-term Opportunity Zone investments.

Investors can now roll capital gains into a Qualified Opportunity Funds and enjoy significant deferral of capital gains from the initial investment, a reduction in the amount of capital gains owed from the initial investment and complete forgiveness of future capital gains from the QOF investment. 

Tax Cuts and Jobs Act of 2017

Tax Benefits

Defer

Defer taxes on existing capital gains until as late as December 31, 2026.

reduce

Reduce the amount of the deferred capital gains by as much as 15%.

eliminate

Eliminate all capital gains tax on the new Opportunity Fund investment if the investment is held for 10-years.

Simple Math

For the sake of simplicity, let’s use some simple math.

If you hold your qualified investment for 10-years and take advantage of the main tax incentive, you will pay zero capital gains tax on any gain realized by the investment.

Assuming a capital gains tax rate of 20% and that you realized  a capital gain of $100,000 on your investment, you would save $20,000 in capital gains tax.

 

" Opportunity Zone investments have the potential to generate more than double the after-tax profits compared to a standard taxable portfolio."
Cadre Investment Platform
- October 2018

timeline

Assumes $IMM Investment : 10-Year Hold

Assumes 20% Capital Gains Tax Rate Plus $3.8% NIIT

For Illustration Purposes Only

Event

January1, 2019

Liquidation

Investor sells assets and generates a capital gain of $1MM. Investor elects to reinvest capital gain into a Qualified Opportunity Fund to take advantage of OZ tax benefits.

May 31, 2019

Investment + Deferral

Investor invests $1MM of capital gain into QOF and elects to defer $240K of tax liability until December 31, 2026 (unless investment sold earlier).

May 31, 2024

Year 5 Capital Gain Tax Deduction

Deferred capital gain reduced by 10%. $240K capital gains tax liability is reduced to $215K, saving $25K

May 31, 2026

Year 7 Capital Gain Tax Deduction

Deferred capital gain reduced by additional 5% for total of 15%. $240K capital gains tax liability is reduced to $200K, saving $40K.

December 31, 2026

Tax Recognition Date

Deferred capital gain comes due and the investor is liable for the $200K capital gains. Saving of $40K.

May 31, 2029

Disposition & Elimination

Investor sells QOF investment. Assuming a sale of $2MM (7% annual appreciation over 10-years), capital gains liability is eliminated resulting in saving of  $240K.

after-tax IRR

4 %
LTCG 23.8%, No State, 7% Annual Appreciation

10-Year
after-tax return

$ 650000
LTCG 23.8%, No State, 7% Annual Appreciation

benefit Notes

Day 1

Release Basis

Investor receipts basis from sale of asset and only reinvests the capital gain into the Qualified Opportunity Fund. In 1031 exchange the basis remains committed to the new investment.

Within 180-Days

Defer

Investor must reinvest capital gain into a Qualified Opportunity Fund and can’t invest directly into the asset. Investment must occur within 180-days. Must elect to defer capital gain.

Minimum 5-Years

Reduction

Investor banks 10% reduction in capital gains liability. IRS allows 10% step-up in basis.

Minimum 7-Years

Further Reduction

Note that strict timeline requires QOF investment by 31 December, 2019 in order to meet 7-year rule by December 31, 2026 sunset date.

Important Planning Date

Capital Gains Payment

Investor must budget for capital gains liability and should not realize QOF investment before expiry of the 10-year hold period.

Generational Tax Planning Opportunity

Unlimited Capital Gains Saving

No limit to capital gain saving. If investment decreases then basis is decreased by same amount so as to provide investment safety net.

scaling of tax benefit

5-Year Benefit $100K
7-Year Benefit $200K
10-Year Benefit $500K
Maximum Tax Benefit Unlimited

Scaled Tax Benefits of Opportunity Fund versus Standard Fund.

OZ Colorado INC

Long Term Investment

The Opportunity Zone program provides that you can invest under the program until December 31, 2026 and must sell your interest by December 31, 2047.

The 10-year minimum investment horizon requires investors to view the Opportunity Zone program as a long-term investment. You need to pay careful attention to how the fund will be managed, what fees are paid, how revenue is distributed and what contingencies plans are in place if market conditions change or the fund under performs.

Defined Exit Plan

As with all long -term investments, and especially with Opportunity Zone investments, you need a defined exit plan. In particular you need to have a clear understanding of how and when you will sell your interest in the Qualified Opportunity Fund.

If you invest in your own fund you can determine your own exit plan. If you invest in a third party fund you may not control the exit plan. Will the fund be liquidated at an agreed date? Is there a buy out or redemption agreement? Can you elect to hold your interest past the minimum 10-year period?

Colorado Opportunity Zone Guide

Download the updated and in-depth Colorado Opportunity Zone guide created specifically for investors looking to understand and discover how to make qualified investments within Colorado.

The Newsletter

Get all the local news and information you need to invest in the O-Zone!

Let's Chat

Phone: 303-803-3242
Email: ross@ozcolorado.com
7857 Country Creek Drive,
Niwot CO 80503