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Opportunity Zones Hype Overshadows Potential Pitfalls and Risks

March 27, 2019

Opportunity Zones Hype Overshadows Potential Pitfalls and Risks

March 26, 2019 | Beth Mattson-Teig | National Real Estate Investor

Dozens of Opportunity Zone funds are racing to capture a wave of private equity dollars seeking value-add investments that come with the added perk of a hefty break on capital gains taxes. The frenzy is creating a bit of a Wild West mentality that has some raising concerns about the potential dark side to Opportunity Zones.

Many view the new Opportunity Zone program created by the 2017 Tax Cuts & Jobs Act as having the potential to be the most significant federal community development initiative in U.S. history, with billions—perhaps trillions—of dollars in private equity targeting investment opportunities in low-income communities around the country. Yet there are still numerous questions, concerns and potential pitfalls that could rewrite that history.

One of the biggest frustrations surrounding Opportunity Zones is that the rules to date are somewhat ambiguous and the IRS and Treasury Department have been slow to release additional guidance on key issues for stakeholders who are chomping at the bit to move forward. “Everybody is waiting anxiously to see what the regulations will provide for so that they can actually execute,” says Andrew Charles, a partner at Kramer Levin Naftalis & Frankel LLP in New York City. “I think activity will pick up exponentially once the final regulations come out.” The guidance was delayed because of the government shutdown earlier this year, but it is expected to be released in late March or early April.

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John E. Moriarty, ChFC
December 2015
February 3, 2016

I have been in the financial services industry for 20 years and our firm provides an education platform that gets clients to “think differently” about their financial picture.  For many years we have communicated to clients the need to diversify their portfolios using alternative asset classes and more specifically, private non-traded investments.  Due diligence on these types of financial vehicles is essential and when I learned about Blue Vault in 2010, our firm immediately began using their material as a tool to build confidence in the minds of our advisors on which alternatives to recommend to clients.  I am impressed with the way Blue Vault continues to add value to their subscribers and I view their publication as a tremendous resource in today’s complex world.