Panel Slideshow on Central Florida Opportunity Zones Scott Callahan, Winter Park, FL

1. GET IN THE ZONE:
CENTRAL FLORIDA
OPPORTUNITY ZONES
Featuring Panelists: Sherry Gutch, City of Orlando
Peter Hilera, WithumSmith+Brown
James Pratt, Burr & Forman
Moderated by: Scott Callahan, Salerno Capital Partners

2. Overview of Qualified
Opportunity Zones from
the Tax and Real Estate
Perspectives

3. 3Qualified Opportunity ZonesQualified Opportunity Zones
Tax aspects of Qualified Opportunity Zones
Qualified Opportunity Zone Goals
How does it work?
QO Funds
QO Zone property
Proposed Regulations and open questions

4. 4Qualified Opportunity ZonesQualified Opportunity Zones
Qualified Opportunity Zone Goals
The 2017 Tax Cuts and Jobs Act established the
Qualified Opportunity Zone program
Designed to spur long-term private investment in
low-income communities
Allows investors to reinvest capital gains in
distressed communities
Should channel more equity capital into these
markets

5. 5Qualified Opportunity ZonesQualified Opportunity Zones
Step 1 - Taxpayer recognizes gain from the sale of
any type of property producing capital gain
Step 2 – Within 180 days of the sale, the taxpayer
reinvests gain amount into a Qualified
opportunity fund (QOF)
Step 3 - The QOF, in turn, must invest at least 90%
of its assets as Qualified Opportunity Zone
Property
How does it work?

6. 6Qualified Opportunity ZonesQualified Opportunity Zones
Tax Incentive Benefits
1.Temporary
Deferral of gain
(through 12/31/2026)
2. 3.
Partial
reduction of
deferred gain
(up to 15%)
Exclusion of
subsequent gain
(if investment held 10 years)

7. 7Qualified Opportunity ZonesQualified Opportunity Zones
Temporary deferral and possible basis adjustment
10 percent (if the investment in a QOF held for 5 years) or 15 percent (if the investment in a QOF held for 7
years) of the deferred capital gain is permanently excluded from taxation
SALE
INVESTMENT
Basis increased by
10% of the
deferred gain
90% of gain taxed
HELD FOR 5 YEARS
Basis increased by
another 5% of the
deferred gain
85% of gain taxed
HELD FOR 7 YEARS
2018 2019 2020 2021 2023 2024 2025 20262022

8. 8Qualified Opportunity ZonesQualified Opportunity Zones
Exclusion of Subsequent Gains
If the Investment in a QOF is held for at least 10 years – elimination of tax on all gains earned above
the original amount invested in a QOF
SALE
INVESTMENT
Basis increased by
10% of the
deferred gain
90% of gain taxed
HELD FOR 5 YEARS
Basis increased by
another 5% of the
deferred gain
85% of gain taxed
HELD FOR 7 YEARS
Basis is equal
to Fair Market
Value
Exclusion of
gain on
appreciation of
investment
Requires an
election
HELD FOR 10 YEARS
2018 2019 2020 2021 2023 2024 2025 2026 2027 20282022

9. Taking Advantage of Tax Benefits
 New business models in real estate
investing?
 Can this program turn a bad deal into a
good deal?

10. Local Governmental Incentives and
Support for Opportunity Zone Projects
 Considering layering incentives for specific projects based
on compatibility with community goals and geared toward
high social benefits; i.e. job creation bonuses under the
State QTI Program, tax rebates and/or infrastructure
development.
 Pair investments with other sources of funding; CDBG, etc.
 Expedite permits for priority projects.

11. 11Qualified Opportunity ZonesQualified Opportunity Zones
What qualifies as a QO Fund?
Any investment vehicle that is organized as a corporation
or a partnership for the purpose of investing in QO Zone
property
Must hold at least 90% of its assets in QO Zone property
(average of the percentage of QO Zone property held in
the QO Fund)
QO Funds will self-certify with the IRS, no approval or
action by the IRS is required. A taxpayer completes a
Form 8996 and attaches form to its federal income tax
return

12. 12Qualified Opportunity ZonesQualified Opportunity Zones
What is QO Zone Property?
QO Zone property includes:
 QO Zone stock
 QO Zone partnership interest
 QO Zone business property
For stock and partnership interests, must be:
 Acquired after Dec. 31, 2017 for cash;
 A QO Zone business, and must remain so for
substantially all of the QO Funds holding period

13. 13Qualified Opportunity ZonesQualified Opportunity Zones
Qualified
Opportunity
Zone
Property
Qualified Opportunity Zone Stock
(Corp.)
(Qualified Opportunity Zone Business)
Qualified Opportunity Zone
Partnership Interest
(Qualified Opportunity Zone Business)
Qualified Opportunity Zone Business
Property
QO Zone property includes:

14. Real Estate Considerations in
Opportunity Zone Fund Investments
 Practical Application of Participation and Deadlines
 Commercial Finance Issues
 Managing the Transaction

15. City’s Role

16. Three parts of the Program; Investments, Zones and Funds
Convene regional stakeholders and connect the funds with the projects.
A critical step for communities interested in attracting Opportunity Zone
investment is the development of an investable pipeline of projects.
To leverage and directly invest in projects to create new opportunities for
residents and upward mobility.
Role

17. Identified and designated Branded Districts
Created a new beta site for designated Orlando Opportunity Zones:
•Community Identification (Branded Districts)
•Demographic Information
•Incentive Layers
Development Prospectus:
•Investment and Redevelopment Opportunities
•Branded District Overview and Demographics
City Projects

18. Branded Districts
1. Colonialtown South
2. Greater Washington Shores
3. Holden Heights
4. La Costa
5. Mercy Drive
6. Packing District
7. Rosemont
8. SODO District
9. South Parramore
10.Executive Airport
Properties
11.West Lakes
12.West Colonial Drive

19. 19Qualified Opportunity ZonesQualified Opportunity Zones
What type of investments will qualify?
Commercial real estate development and renovation in QO Zone
New businesses opening in a QO Zone
Expansion of existing business into QO Zone
Significant expansion of businesses already within QO Zone

20. 20Qualified Opportunity ZonesQualified Opportunity Zones
Pass-Through Entities - both partnerships and their partners are eligible to defer
all or a portion of capital gains.
Treatment of land when a QOF acquires a building located on land within an
Opportunity Zone - substantial improvement will be measured by QOF’s
additions to the adjusted basis of the building, not both the building and the
land
Substantial Improvement of QOZ Property and Timing – The substantial
improvement must be completed within any 30-month
The “Substantially All” Requirements - A QOF may own a QOZ Business (rather
than directly owning QOZ Property). To qualify as a QOZ Business, “substantially
all” of the tangible property owned or leased by a QOZ Subsidiary must
constitute QOZ Business Property. The “substantially all” requirement is
satisfied if 70% of the tangible property by a trade or business is QOZ business
property.
The Proposed Regulations

21. Questions?
City of Orlando Opportunity Zone website
www.orlando.gov/opportunityzones
Withum’s Opportunity Zone Resource Center
www.withum.com/service/opportunity-zone-
resource-center