Qualified Opportunity Zones: Risks

As with any investment, you should understand the risks associated with Qualified Opportunity Zone (QOZ) funds as outlined below. When selecting a QOZ fund, prospective investors should consult their tax advisor about their investment choices.

There are substantial risks associated with the U.S. federal income tax aspects of a purchasing interests in a QOZ fund. The following risk factors summarize some of the tax risks to an investor. All prospective investors are strongly encouraged to consult with and rely on their own tax advisors. The tax discussion here is not intended, and should not be construed, as tax advice to any potential investor.

• There is a lack of precedent and limited guidance related to qualified opportunity funds.
• A program intended to qualify as a QOZ fund may not constitute a QOZ fund for a variety of reasons, including a failure to substantially improve the property within the first 30 months of its operation. If a fund does not qualify as a QOZ fund, then no deferral or elimination of taxable gain will be available to its members.
• Investors who hold interests in a QOZ fund through December 31, 2026, and who have deferred gain through that time by acquiring such interests, will automatically recognize some or all of the federal income tax gain that they deferred on December 31, 2026.
• The state, local and other tax implications of a QOZ zone investment are unclear.