QO Zone Program Q&A
What is a QO Zone?
A QO Zone is a population census tract that is a low-income community that has been designated as a QO Zone. A designation as a QO Zone remains in effect for 10 years. Over 8,700 QO Zones have been designated and on June 20, 2018, the IRS released a complete list and map of the QO Zones. For a list and map of QO Zones in Missouri, please click here.
What is a QO Fund?
A QO Fund is any investment vehicle that is organized as a corporation or partnership (including a limited liability company treated as a partnership for U.S. federal income tax purposes) for the purpose of investing in qualified opportunity zone property (other than another QO Fund) that holds at least 90% of its assets in qualified opportunity zone property. Qualified opportunity zone property includes any qualified opportunity zone stock (“QO Zone Stock”), qualified opportunity zone partnership interest (a “QO Zone Partnership Interest), or qualified opportunity zone business property (“QO Zone Business Property”).
What is QO Zone Stock and a QO Zone Partnership Interest?
An equity interest in a corporation or partnership will qualify as QO Zone Stock or a QO Zone Partnership Interest if it satisfies three requirements:
- It must have been acquired at original issuance solely in exchange for cash;
- At the time the stock or partnership interest was issued, the corporation or partnership was a qualified opportunity zone business (or, in the case of a new entity, was being organized for purposes of being a qualified opportunity zone business); and
- During substantially all of the QO Fund’s holding period for such stock or partnership interest, such corporation or partnership qualified as a qualified opportunity zone business (“QO Zone Business”).
What is a QO Zone Business?
QO Zone Stock and QO Zone Partnership Interests require a QO Zone Business. A business is a QO Zone Business only if all of the following requirements are satisfied:
- Substantially all of the tangible property owned or leased by the taxpayer must be QO Zone Business Property. QO Zone Business Property is tangible property that satisfies a number of requirements: (i) the property must be acquired by purchase, (ii) the original use of the property in the QO Zone must have commenced with the QO Fund or the QO Fund must have “substantially improved” the property, and (iii) substantially all of the use of such property must be in a QO Zone;
- At least 50% of the total gross income of the business is derived from the active conduct of such business;
- A substantial portion of the intangible property of such entity is used in the active conduct of any such business;
- Less than 5% of the average of the aggregate unadjusted bases of the property of such entity is attributable to nonqualified financial property; and
- The business cannot be a private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, racetrack or other facility used for gambling, or any store the principal business of which is the sale of alcoholic beverages for consumption off premises.
