The Opportunity Zones (OZ) program, created by the Tax Cuts and Jobs Act of 2017, encourages investment in low-income communities to spur economic growth and job creation while providing tax benefits to investors under certain conditions. The program is now permanent alongside several modifications under the One Big Beautiful Bill Act (OBBBA). The tightened definition of “low-income community” and stricter criteria for zone eligibility is expected to result in fewer Qualified OZs in the future. Governors will propose new OZs every 10 years, beginning July 1, 2026, and taking effect January 1, 2027. Taxpayers can temporarily defer capital gain tax by investing in a Qualified Opportunity Fund (QOF) which are either partnerships or corporations that are setup specifically to invest in QOZ property. Taxpayers investing into a QOF after December 31, 2026 can defer gains for five years or until the investment is sold, whichever comes first. They will also receive a 10% basis step-up after five years. Holding the investment is capped at 30 years and at the 30th year, the basis will be stepped up to its fair market value. Any increase in value after the 30 years may be subject to tax. To boost rural area investments, the OBBBA establishes Qualified Rural Opportunity Funds (QROFs). QROFs get a 30% basis step-up after five years compared to 10% for QOFs and requires 50% of substantial improvements compared to 100% for QOFs. QOFs have new reporting requirements and penalties are enacted for non-compliance.
Trust Taxation Basics: Who Pays the Tax? – Part 1
One of the most common questions trustees face is: Who is responsible for paying income tax—the trust or the beneficiary? The answer depends primarily on whether income is retained by the trust or distributed to beneficiaries. Generally, trusts are separate tax-paying...
