OZ MAGAZINE 2022 Top 25 Influencers issue 2.2 - Page 12
12 OPPORTUNITY ZONE MAGAZINE | ISSUE 2 • VOLUME 2
ALTERNATIVES FOR CORPORATE STRUCTURING AND
NAVIGATING DEAL POINTS
By Ronald Fieldstone
Learn about direct Qualified Opportunity Funds and key structuring factors .
The structuring of an opportunity zone transaction can be quite complicated and require an analysis of many different alternatives in connection therewith . Below is a list of various types of structuring that need to be considered :
1 . DIRECT QOF INVESTMENTS
When the qualified opportunity zone fund ( QOF ) is formed , that entity itself could directly invest in a project providing it meets the 90 %/ 10 % test meaning that 90 % of the proceeds would need to be invested in the project as of all the testing dates ( June and December 31 each year ) in order to meet the requirements related to the OZ program . This is not a typical structure but can be utilized in a very simple transaction where property is purchase and the monies are expended in a short period of time or monies are contributed over a period of time and spent to complete the project .
2 . UTILIZATION OF QOZB
What is more common is for the QOF sponsor to establish a qualified opportunity zone business ( QOZB ), and the QOF will then invest in the QOZB . Both entities need to be taxpayer entities , which are typically limited partnerships or limited liability companies . The advantage of establishing a QOZB is the compliance requirements are more flexible . Again , the QOF would need to invest at least 90 % of its proceeds into the QOZB although it is common for a QOF to invest all of its proceeds into a QOZB in order for all of the funds are utilized to develop the project . A QOZB would then only need to have the advantage of only having 70 % of its assets utilized for project expenses as of each testing date , with available cash being utilized for project expense . Up to 30 % of the assets in a QOZB could be invested outside of the opportunity zone , although the funds still need to be invested in accordance with the OZ Program and in accordance with