U.S. Department of Treasury Approves Governor Murphy’s Qualified Opportunity Zones

As we advised in our recent client alert, the Qualified Opportunity Zone Program, enacted as part of The Tax Cuts and Jobs Act, is designed to promote and drive investment in low-income communities by allowing taxpayers to defer, reduce, and potentially exclude, the recognition of gain on certain investments made in Qualified Opportunity Zones.

As required by the Qualified Opportunity Zone Program, on March 21st Governor Murphy nominated 169 low-income tracts in 75 municipalities throughout 20 counties in New Jersey for designation as Qualified Opportunity Zones. On April 9th the U.S. Department of Treasury approved Governor Murphy’s designation of such tracts as Qualified Opportunity Zones. A list of the designated Qualified Opportunity Zones in New Jersey identified by census tract number can be reviewed here.

The U.S. Department of Treasury has published an interactive map that can be used to determine whether a particular lot is included in a designated Qualified Opportunity Zone. To view the designated Qualified Opportunity Zones in New Jersey, click on the “Layers” tab on the right-hand side of the screen. Select “Opportunity Zone Tract Designated” and unselect “2011-2015 LIC Census Tract All,” and zoom in on New Jersey. The designated Qualified Opportunity Zones will be displayed in blue.

You may also search for the census tract number of a particular lot by entering the street address of the lot here. The census tract number of the lot is a combination of the State Code (34), County Code and Tract Code contained in the Matched Address box on the left-hand side of the screen.

The U.S. Department of Treasury’s acceptance of Governor Murphy’s designation of Qualified Opportunity Zones is a crucial step in the implementation of the Qualified Opportunity Zone program. The next step will be the formation of Qualified Opportunity Funds, which are the vehicles that will actually make the investments in the Qualified Opportunity Zones. Further guidance from the U.S. Department of Treasury regarding the requirements for creating and certifying Qualified Opportunity Funds is expected in the next few months.

The benefits of the Opportunity Zone Program are clear: (i) significant tax deferral and potential tax savings, (ii) potential wealth transfer opportunities, and (iii) promotion of investment in Qualified Opportunity Zones, each of which creates opportunities for investors, real estate developers and business owners.