Commercial Investment Real Estate September/October 2019 | Page 16

FINANCING
FOCUS
Learning from
Experience
Opportunity zones have plenty of potential, so here are lessons
to be learned from the industry’s experience with EB-5 visas.
by Michael Halloran
14
September | October 2019
unexpected tax liabilities due to unintentional lack of compliance.
Because of the inevitability of change, it is vital to be transparent
from the start and have a fund administrator who can keep your
data organized.
One thing will stay constant: No matter what regulatory
changes are made throughout the process, given the sophistica-
tion of opportunity zones, you want data with the sophistication
to match.
What Did EB-5 Teach Us?
Setting up an initial opportunity fund might be simple, but pre-
paring for how the landscape around opportunity zones will
change is not. Understanding the tax and securities laws is diffi-
cult. Keeping up with developing tracking and reporting require-
ments can be extremely challenging, especially for new market
entrants. Frankly, an Excel spreadsheet isn’t going to cut it.
Examining the EB-5 program can illuminate important
lessons about transparency. United States Citizenship and
COMMERCIAL INVESTMENT REAL ESTATE
T
he power of opportunity zones has yet to be unleashed.
With the potential to be a transformative economic
development tool, this program should be embraced
by stakeholders, but they need to be cautious to avoid
potential pitfalls.
Opportunity zones may seem too good to be true. These funds
aim to produce a healthy return for investors by offering valuable
tax benefits, including capital gain deferrals, partial elimination
of capital gains taxes on the deferred capital gain, and total elimi-
nation of taxes on the appreciation of the investment.
The obvious benefits — for investors and fund managers —
are there. But to maximize the program’s success, meaningful
best practices must be adopted industry-wide. Security,
compliance, and transparency will be huge components of a
successful program.
Opportunity zones are still new, which means important guid-
ance is still being developed by the U.S. Treasury, IRS, and state
and local authorities. As a result, investors may face greater risk of