The term Opportunity Zone refers to legislation passed in 2017 which seeks to stimulate private investment in communities that are reputedly in need of economic development. It does this through a series of tax deferment incentives. Essentially, if you roll over your capital gains from another investment into an OZ fund, you can avoid paying taxes on those gains, sometimes indefinitely.

Opportunity Zones were nominated by local governments, approved by the states, and eventually by the US Treasury Department. These neighborhoods must meet minimal definitions of low income and median income levels and are delineated by census tract.

To access these tax benefits, investors must invest in Opportunity Zones specifically through Opportunity Funds, like the Cultural Impact Fund. A qualified Opportunity Fund is a US partnership or corporation that intends to invest at least 90% of its holdings in one or more qualified Opportunity Zones. Opportunity Funds predominantly invest in the construction of new buildings and the substantial improvement of existing unused buildings or of certain qualified businesses.

If an Opportunity Fund invests in the improvement of an existing building, it must generally invest more in the improvement of the building than it paid to buy the building. Whether the building is constructed from the ground up or improved, the development of the building must be completed within thirty months of purchase.

Current OZ legislation predominantly benefits high net worth, accredited investors and there is no legal obligation for a fund to ensure that its impact is actually needed or even welcome in a given OZ neighborhood. Too often, the result is gentrification and displacement. CIF projects promote thoughtful impact investors who make fair returns for high quality community focused projects.