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Investors received a massive boost yesterday when Treasury put a spotlight on business investments within Opportunity Zones.

This is a real winner for both business owners and investors.”

— Jeff Hudson Halagard CEO

DALLAS, TEXAS, US, April 18, 2019 /EINPresswire.com/ — The 2nd round of Opportunity Zone (OZ) rules released by the Treasury yesterday make it clear that Washington DC understands the way to super charge OZ’s lies in a healthy mix of investments in real-estate and increasing the business foot print by supporting small businesses and new ventures in OZs.

Until this round of rules was released, OZ’s were just another real-estate investment and tax program. That all changed yesterday, when the rules for investing in businesses received tremendous clarity and the Administration made it clear they are focused on businesses. “This is a real winner for both business owners and investors”, said Jeff Hudson Halagard CEO.

The updated OZ rules align perfectly with the Halagard model for Connect-In which allows both OZ and Non-OZ companies to sell equity for capital. We put together a short video about how Halagard helps business owners.

What types of businesses can take advantage of the OZ rules? Any business except for the following types: liquor stores, strip clubs, casinos, massage parlors, racetracks and golf courses; the so-called sin businesses.

Can a business not currently located in an OZ also leverage the rules? Yes, any business can take advantage of OZ rules so long as it meets the one of the safe harbor rules for 50%. This means businesses currently in OZ can expand outside the OZ, existing businesses can open offices in an OZ or a startup up can select an OZ for their office. Below are the 3 safe harbors and examples provided by the Treasury.

1) The first safe harbor in the proposed regulations requires that at least 50 percent of the services performed (based on hours) for such business by its employees and independent contractors (and employees of independent contractors) are performed within the qualified opportunity zone. This test is intended to address businesses located in a qualified opportunity zone that primarily provide services. The percentage is based on a fraction, the numerator of which is the total number of hours spent by employees and independent contractors (and employees of independent contractors) performing services in a qualified opportunity zone during the taxable year, and the denominator of which is the total number of hours spent by employees and independent contractors (and employees of independent contractors) in performing services during the taxable year.
• For example, consider a startup business that develops software applications for global sale in a campus located in a qualified opportunity zone. Because the business’ global consumer base purchases such applications through internet download, the business’ employees and independent contractors are able to devote the majority of their total number of hours to developing such applications on the business’ qualified opportunity zone campus. As a result, this startup business would satisfy the first safe harbor, even though the business makes the vast majority of its sales to consumers located outside of the qualified opportunity zone in which its campus is located.

2) The second safe harbor is based upon amounts paid by the trade or business for services performed in the qualified opportunity zone by employees and independent contractors (and employees of independent contractors). Under this test, if at least 50 percent of the services performed for the business by its employees and independent contractors (and employees of independent contractors) are performed in the qualified opportunity zone, based on amounts paid for the services performed, the business meets the 50-percent gross income test found in section 1397C(b)(2). This test is determined by a fraction, the numerator of which is the total amount paid by the entity for employee and independent contractor (and employees of independent contractors) services performed in a qualified opportunity zone during the taxable year, and the denominator of which is the total amount paid by the entity for employee and independent contractor (and employees of independent contractors) services performed during the taxable year.
• For illustration, assume that the startup business described above also utilizes a service center located outside of the qualified opportunity zone and that more employees and independent contractor working hours are performed at the service center than the hours worked at the business’ opportunity zone campus. While the majority of the total hours spent by employees and independent contractors of the startup business occur at the service center, the business pays 50 percent of its total compensation for software development services performed by employees and independent contractors on the business’ opportunity zone campus. As a result, the startup business satisfies the second safe harbor.

3) The third safe harbor is a conjunctive test concerning tangible property and management or operational functions performed in a qualified opportunity zone, permitting a trade or business to use the totality of its situation to meet the requirements of sections 1400Z-2(d)(3)(A)(i) and 1397C(b)(2). The proposed regulations provide that a trade or business may satisfy the 50-percent gross income requirement if (1) the tangible property of the business that is in a qualified opportunity zone and (2) the management or operational functions performed for the business in the qualified opportunity zone are each necessary to generate 50 percent of the gross income of the trade or business.
• Thus, for example, if a landscaper’s headquarters are in a qualified opportunity zone, its officers and employees manage the daily operations of the business (occurring within and outside the qualified opportunity zone) from its headquarters, and all of its equipment and supplies are stored within the headquarters facilities or elsewhere in the qualified opportunity zone, then the management activity and the storage of equipment and supplies in the qualified opportunity zone are each necessary to generate 50 percent of the gross income of the trade or business.

Additionally, another rule clarification makes investing in businesses ideal for Qualified Opportunity Funds (QOF’s). instead of having to invest in a company for 10 years QOFs can buy & sell equity in businesses throughout the 10-year period so long as they reinvest the proceeds within 12 months in another OZ investment. Another perfect alignment with the Halagard Marketplace.

Mr. Halagard
Halagard Inc.
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Source: EIN Presswire