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The Opportunity Zone (OZ) program, created as a part of the federal Tax Cuts and Jobs Act of 2017, aims to encourage private investment in low-income communities. There are 252 census tracts in North Carolina designated as OZs. Investors receive tax benefits for reinvesting capital gains into designated OZs. Real estate development projects make ideal OZ investments due to the long hold periods required to take full advantage of the federal tax benefits. Investments in real estate projects located in OZs grew 2000% over the first three years of OZ to more than $16 billion.

An OZ designation, however, does not on its own promise increased investor interest. The most strategic local governments will identify attractive development opportunities, make them “investment-ready,” and market them to as many OZ investors as possible. Development Finance Initiative (DFI) projects have successfully attracted over $1 billion in private investment since 2011. OZs are simply the latest tool to spur local investment for our local government partners and DFI is ready to help.

Opportunity Zones are the latest tool to spur local investment for our local government partners and DFI is ready to help.

Investors must find investment-ready projects in OZs in order to take advantage of OZ tax benefits. The communities that will attract the most OZ investment will be communities that:

  • identify attractive private development properties/projects inside OZs,
  • secure site control (option agreement or similar instrument) of those properties/projects (do not cede control of the property to speculators)
  • make those projects “investment ready,” and
  • market them to as many OZ developers and investors as possible.

UNC DFI has worked on hundreds of local government projects since 2011 to attract private investors for transformative projects, so DFI is accustomed to performing these steps for local government-controlled property. DFI  assists its local government partners until the investment closes, providing expertise at every step of the pre-development process.


A full pre-development process will typically take at least 6 to 12 months. DFI recommends that local governments begin pre-development activities for OZ projects as soon as possible to maximize the value an Opportunity Zone designation can provide to investors.

Equity invested in OZs before the end of 2019 received a 15% reduction in tax basis for purposes of capital gains taxes. OZ investments made by the end of 2021 benefited from a 10% reduction in tax basis. OZ investments after that time miss those reductions in tax basis but still avoid capital gains tax if held for more than ten years.

DFI’s pre-development process is well suited for Opportunity Zones.

UNC DFI’s pre-development process includes in-depth market, site, and financial analyses, identification of potential development partners, and guidance on structuring public-private partnerships. This pre-development process pairs well with the OZ program and can allow local governments to create investment opportunities with transformative community impact.

The Opportunity Zone program is a new way to incentivize investment in communities across the state. For most communities, the designation of an Opportunity Zone, on its own, may not spur development activity. UNC DFI can help local governments develop strategies to not only attract investment, but to create projects that achieve local goals.

Investment Mechanics

Capital gains realized after December 31, 2017 and reinvested in Opportunity Funds receive federal capital gains tax deferral until December 31, 2026 or until sale of Opportunity Zone investment (whichever comes first).

To receive tax benefits, Opportunity Funds must invest in “qualified opportunity zone property” for substantially all of the Fund’s holding period.

Early adopters could take advantage of a special capital gains tax reduction if they held OZ property for at least five years (for a 10% reduction) or seven years (for a 15% reduction). However, the tax recognition date is currently set for December 31, 2026, so OZ investments made after 2021 cannot take advantage of the early adopter tax benefits.

Opportunity Fund investments held for 10 or more years will pay no capital gains on appreciation of the Fund, due to step-up in basis to fair market value at time of sale.

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Investments that pair well with Opportunity Zones

Though the Opportunity Zone program does not limit private investment potential to projects that meet community economic development priorities, strategic local governments can meet community goals by positioning Opportunity Zone properties for:

  • Affordable housing & workforce housing projects
  • New Markets Tax Credits projects
  • Historic Tax Credits projects (as long as improvements made to the investment are equal to or greater than initial investment over any 30-month period during the investment)
  • Market-rate development

For more information about Opportunity Zones and how DFI can help your community prepare for OZ investors, contact Marcia Perritt at