Opportunity Zones (OZ) were enacted into federal law through the Tax Cuts and Jobs Act of 2017 to spur private investment in distressed communities across the United States. The program provides a federal tax incentive for investors who invest in real estate projects and operating businesses located in designated communities through deferral and partial tax reductions of reinvested capital gains, and forgiveness of tax on new capital gains.
Baltimore County is working proactively with investors, developers, businesses, communities and other stakeholders to provide information and coordination assistance. The U.S. Treasury designated 149 OZ in Maryland with 10 being located in Baltimore County. Search for a specific address using a map of Baltimore County’s Opportunity Zones.
Investors
Investors interested in taking advantage of the OZ tax benefit must invest realized capital gains into a Qualified Opportunity Fund (QOF) within 180 days that the capital gains are realized. The tax benefits associated with a QOF are threefold:
- Deferral on the original capital gains taxes invested in a QOF until 2026 (or the sale of the investment)
- Reduction of capital gains tax on the original capital gain investment by 10 percent basis points after a five-year hold and by 15 percent basis points after a seven-year hold
- Tax-free appreciation on the original capital gains if an investment is held for at least 10 years; the investor pays no capital gains taxes on appreciation in the investment above the original capital gains investment
Qualified Opportunity Funds
- Private-sector, U.S Treasury qualified investment vehicles that invest at least 90 percent of their capital in OZ.
- Must be set up as a partnership or LLC.
- A taxpayer must self-certify on their tax return by completing a form to create an Opportunity Fund. A draft form has been released by the U.S. Treasury.
- Equity investment derived from an investor’s capital gains from a prior investment.
Sample Opportunity Zone Investment
- January 2, 2019—Taxpayer receives $1 million in capital gains generated from a sale
- June 30, 2019
- Taxpayer has 180 days to contribute capital gains into a qualified OZ Fund
- The QOF invests the $1 million in Qualified OZ property
- June 20, 2023
- Basis: $0 to $100,000
- Taxpayer basis increases by 10 percent. Basis is considered to start at zero when funds are first invested
- June 30, 2025
- Taxpayer basis increases to 15 percent
- Basis: $100,000 to $150,000
- December 31, 2026
- $850,000 taxed
- Deferral period ends. Taxpayer pays 85 percent in basis on OZ fund. Basis then increases to $1,000,000
- June 30, 2028—Basis is fair market value. Taxpayer sells investment for $3,000,000. Taxpayer doesn't owe tax on appreciation of investment.
Real Estate and Operating Businesses
QOF can invest in eligible commercial, residential, mixed-used real estate properties and operating businesses located in OZ. Certain types of operating businesses located in OZ are not eligible for investment, including: golf courses, country clubs, gambling establishments, racetracks, liquor stores, massage parlors and suntan and hot tub facilities.
If you have a real estate or operating business project you would like for potential investors to know about, email businesshelp@baltimorecountymd.gov.
Communities
OZ offer states, cities and communities a unique resource for working with local, regional and national partners to attract new investment in their economic development projects. These resources provide useful ideas and guidance for communities:
- How Cities Can Maximize Opportunity Zones—Learn more about "focus areas" from Nowak Metro Finance Lab.
- Recommendations for Opportunity Zones—Learn more about leveraging private investment for equitable economic development.
- Maryland's OZ Information Exchange Portal—View projects currently being promoted.
- Maryland State's Opportunity Zone Map Listing Entry Form—Add your OZ listing to the database.
Other Resources
To find potential projects located in Maryland's OZ or to list your project, explore the state's helpful tools below:
- Information Exchange—Search to find available investments, businesses, funds or projects in Maryland.
- Incentive Lookup—Find the state and local financial incentives, tax credits and grants for your business or project.
- Add My Listing—Submit your information to list your businesses, project or fund in the Information Exchange.
- Fact Sheet—Find additional resources from the state to learn more about participating in OZ in Maryland.