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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 42 August 2023 F E A T U R E INVESTING IN OPPORTUNITY ZONE FUNDS FOR BUSINESS AND SUSTAINABLE CONSTRUCTION By understanding the potential of investments in Opportunity Zones, investors can maximize their returns, promote green building initiatives, and shape the future of the construction industry. B y J O H N W O L F I N G T O N O pportunity Zones have gained recognition as a powerful invest- ment tool for real estate develop- ment in economically distressed areas. However, the investment potential extends far beyond real estate. Businesses operating within these zones can also reap significant benefits, while investors have the opportunity to support their missions, especially firms that promote sustainable construction practices and contribute to ad- dressing the global environmental crisis. In this article, we will explore the ad- vantages of investing in businesses within Opportunity Zones; how this strategy can generate higher returns for investors, while benefiting local communities and avoiding taxes; and highlight the benefits of sustain- able construction. By understanding the potential of these investments, investors can maximize their returns, promote green build- ing initiatives, and actively shape the future of the construction industry. What Are Opportunity Zones Funds for Businesses O pportunity Zones are designated eco- nomically distressed areas in the coun- try where investors can enjoy preferential tax treatment on investments in businesses that meet specific criteria. To qualify, these busi- nesses must be located within an Opportu- nity Zone, generate at least 50% of their gross income from active business conduct within the Zone, and have a substantial portion of their tangible property within the Zone. Investing in businesses within Oppor- tunity Zones offers significant tax benefits, such as deferring capital gains taxes, reduc- ing the tax basis, and even eliminating capital gains taxes on new investments if held for a specific period. This makes investing in Op- portunity Zone businesses an attractive op- tion for investors seeking to maximize their returns, while contributing to the economic growth of underprivileged communities. How the Local Community Can Reap the Benefits I nvesting in businesses in Opportunity Zones can have a transformative impact on local communities. By injecting much- needed capital into these areas, investors can help create new job opportunities, stimulate economic growth, and improve the overall quality of life for residents. Additionally, suc- cessful businesses within Opportunity Zones can attract more investors and entrepreneurs, creating a positive cycle of development and revitalization. Why Investors Should Pay Attention to These Opportunities I nvesting in businesses within Opportu- nity Zones can offer several benefits for investors: » Tax advantages: Investors can defer their capital gains taxes by reinvesting them into an Opportunity Zone fund. Furthermore, the tax basis can be reduced by up to 15% if the investment is held for at least seven years, and any capital gains on the Oppor- tunity Zone investment can be completely tax-free if held for at least 10 years. » Higher returns: While real estate invest- ments in Opportunity Zones can generate attractive returns, investing in businesses has the potential for even higher returns. As these businesses grow and succeed, their value can appreciate significantly, of- fering substantial profits for investors. » Diversification: By investing in businesses J O H N W O L F I N G T O N is Principal of Exceler Building Solutions, a designer and manufacturer of exterior building panels with a state-of-the-art, climate-con- trolled facility and national delivery capabilities based in Hazleton, Pennsylvania. John began his career working for his father in the automotive and transportation industry, leasing commercial and personal vehicles before eventually pursuing his passion in real estate development.