Operating Company Focus
Jefferson Capital has pioneered the use of tax-advantaged Opportunity Zone investments in operating companies, the vehicles of job generation, and economic growth for which the program was intended. Misunderstanding of the program’s potential has left qualified Opportunity Zone businesses underinvested and OZ communities underserved, while most OZ investors have focused on real estate investments. Jefferson Capital has developed strategies to overcome the program’s complexity and unlock the true benefit of the OZ program for operating companies.
In 2017, the Federal government passed the Tax Cuts and Jobs Act which created the Opportunity Zone Program.
Investors (any individual or entity) receive tax benefits by making an equity investment in a Qualified Opportunity Fund (QOF) which will invest in areas designated as [Qualified Opportunity Zones (QOZs)
Benefits of the OZ Program include:
Immediate Tax Deferral – Capital gains tax payment deferred until 2026
Step-Up in Basis – After 5 years, investors’ basis increases 10%, permanently reducing capital gains tax
Tax Eliminated – No tax on capital gains from Qualified OZ Fund investments held for at least
Qualified Opportunity Zone investments completed through Jefferson Capital Qualified Opportunity Funds:
Combining OZ with Traditional PE to Eliminate Capital Gains Tax
While other investors have treated the OZ program as primarily a real estate investment vehicle, Jefferson Capital has looked beyond traditional real estate-based structures to help growing businesses take full advantage of the program. For investors, combining the Opportunity Zone program with traditional growth equity funds can potentially eliminate capital gains tax typically generated by private equity investments.