Trade & Invest In America

Seeking additional capital for your EB-5 Project: Consider the new Opportunity Zone Program

by Clem G. Turner, Chiesa Shahinian & Giantomasi PC (CSG)

by Clem G. Turner
Chiesa Shahinian & Giantomasi PC (CSG)

Although there is a significant increase in EB-5 capital originating from India, Vietnam, Brazil and other countries, the EB-5 market has not fully recovered from the decline of Chinese investors in recent years. Although the influx of EB-5 capital remains steady, it may take projects longer to find the capital they seek. This article will examine the newly enacted Opportunity Zone Financing Program, and determine if it might be utilised to provide additional capital into existing or contemplated EB-5 Projects.

What is the Opportunity Zone Program?

On December 22, 2017, the Tax Cuts and Jobs Act created the Opportunity Zone Program, which is designed to foster investment in “Opportunity Zones” (O-Zones). O-Zones are low-income areas designated by each state and certified by the US Secretary of the Treasury. Approximately 8,700 census tracts have been designated as O-Zones. The O-Zone Program provides a significant tax incentive to investors in Qualified Opportunity Funds, which are investment vehicles created to invest in property located in O-Zones.

Qualified Opportunity Funds are to be financed by their investors’ taxable capital gains from prior investments. After a sale, investors have 180 days to funnel their taxable capital gains into a Qualified Opportunity Fund. If the investor holds this investment for five years, their original deferred taxable gain will be reduced by 10%. If the taxpayer holds the investment for two more years, the taxpayer will receive an additional 5% tax reduction. Tax on the original reinvested gain is due on December 31, 2026, therefore to qualify for the full 15% reduction, the investment in a Qualified Opportunity Fund must be made on or before December 31, 2019. If the taxpayer holds the investment in the Qualified Opportunity Fund for at least ten years, the taxpayer will be allowed to exclude the entire gain on any appreciation of the Qualified Opportunity Fund. Although the US Treasury Department has not yet released final Program regulations, numerous Qualified Opportunity Funds have sprung up and are raising significant sums of capital, to be deployed when final regulations are enacted. It is estimated that over $6 trillion in capital gains were realised last year that would have been eligible for tax breaks under the O-Zone Program.

Target Employment Areas v. Opportunity Zones

To qualify for O-Zone funding, an EB-5 Project must be located in an O-Zone. Within the EB-5 Program, most projects are located in Targeted Employment Areas (TEAs). A TEA is a census tract that is either: (a) rural or (b) has an unemployment rate equal to 150% of the national unemployment average. However, EB-5 Program rules allow a number of census tracts with higher unemployment adjoining the EB-5 Project’s location to be incorporated into the TEA analysis. Thus, there is some flexibility in determining if an EB-5 Project is located in a TEA.

For a census tract to qualify as an O-Zone, it must have: (a) a poverty rate of 20% or higher or (b) a median household income that is less than 80% of the surrounding area. However, not every qualifying area has been certified as an O-Zone. The new law allowed governors to designate only 25% of their states’ eligible census tracts as O-Zones. As a result, slightly more than 10% of the country’s census tracts have received an O-Zone designation. If an EB-5 Project is not also in an O-Zone, it will not be eligible to receive O-Zone funds. However, if a project is located in an O-Zone, there is no approval process or waiting time, as Qualified Opportunity Funds can self-certify with the IRS. A link to a list of approved O-Zones and other resources can currently be found at

EB-5 Program and O-Zone Program comparison

Structuring – Both the EB-5 Program and the O-Zone Program require the investors in their projects to be equity holders. In EB-5, the equity held by investors is often in a special purpose vehicle (SPV) and the SPV either finances a loan or a preferred equity investment into the project.  Under the O-Zone Program, it is expected that the investors would hold preferred equity in the project, or in a parent company. Accordingly, existing EB-5 structures may need only moderate revision to accommodate Qualified Opportunity Fund capital. Furthermore, an EB-5 Project raising capital will already have a full suite of equity offering documents, and these documents may only require moderate revision to enable the project to raise Qualified Opportunity Fund capital.

Target investments – While many businesses are eligible for investment under each program, real estate investment is heavily favoured under both. The EB-5 Program requires the investment to generate jobs, and real estate “ground-up” construction or major renovation projects are large job creators. The goal of the O-Zone Program is economic revitalisation, and properties must be either ground up construction developments or major renovations to qualify. While certain “sin” businesses are ineligible for O-Zone benefits (e.g. casinos, liquor stores, massage parlours, etc.), many projects popular with EB-5 investors would work well in the O-Zone Program (e.g. hotels, hospitals, assisted living facilities, schools, etc.).

Investor motivation – While the EB-5 investor is seeking an immigration benefit, and the O-Zone Investor is seeking a tax benefit, both investors are seeking the same prominent feature in an investment property – SAFETY. Under EB-5, the investor is required to hold their investment until they receive their permanent green card, typically a five-year process, though it can be as long as ten years if visas are not available in the investor’s home country. Thus, both types of investors ideally want the project to last 5-10 years and may evaluate potential investments based on longevity. (Eligible EB-5 investors can be redeemed after five years, if necessary, while the O-Zone investors remain in the project.) Furthermore, neither investor is motivated by investment income. Although the O-Zone investor would prefer capital appreciation, dividend distributions to both of these investors may be nominal. Thus, EB-5 investors and O-Zone investors can both be described as “patient” and “content” investors.


The similarities in location, target investments, structure and investor motivation could make eligible EB-5 Projects very interesting to potential O-Zone investors. If your EB-5 Offering could benefit from an influx of inexpensive and patient capital, consider launching an O-Zone Offering. Qualified Opportunity Funds have already been created and will be seeking properties for investment when final regulations are released. If you are interested in pursuing O-Zone capital to supplement your EB-5 raise, or if you are considering an EB-5 investment and have US capital gains that you would like to defer and reduce, contact an attorney or accountant with expertise in this innovative and novel law.


Clem G. Turner
corporate and securities lawyer

Clem Turner is a partner in the New York Office of Chiesa Shahinian & Giantomasi PC, which has been providing quality legal counsel to clients for over 45 years. Clem is a member of the firm’s Corporate and Securities Group. Mr Turner is a graduate of Princeton University and Georgetown University Law Center and is admitted to practice law in New York and California.  

Mr Turner has significant experience in immigration investment, crowd finance, venture capital, securities law, general business and corporate counselling. He has counselled numerous corporations and Regional Centers raising capital through the EB-5 Program on matters of structuring, strategy, securities law and corporate law. His experience includes EB-5 offerings ranging from “direct” $1m raises up to complex $400m raises and everything in between.  

Mr Turner has been selected multiple times as a “Top 15 Corporate EB-5 Attorney” by EB-5 Investors magazine. He has been interviewed about the EB-5 program by various media sources, including NPR’s Marketplace, The Real Deal Magazine, Real Estate Weekly, and Southern China Morning Post. Mr Turner has published several articles related to EB-5 and routinely lectures at events and conferences throughout the world. Mr Turner is a respected member of the EB-5 trade association, “Invest in the USA” (IIUSA), and currently serves on its Public Policy Committee and Chairs its Securities Law Sub-Committee.

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