The Incentive Capital Opportunity Fund invests in real estate and other operational business assets in low-income areas throughout the country, seeking to maximize investor returns through utilizing investor capital in combination with federal, state and local tax and economic incentives.
Invest in Opportunity
Incentive Capital Fund’s (“ICF”) primary investment strategy is to combine investor capital with federal, state and local tax and economic development incentives to maximize each investor’s return on investment and increase the overall impact of an investment on local communities throughout the country. By focusing on incentive-based financing, ICF delivers social and economic impact consistent with the sound policy goals of incentive programs, all while maximizing the economic return to our investors.
What is the Invest in Opportunity Act?
Congress passed the Invest in Opportunity Act in December 2017 as a means to encourage investments in low-income communities throughout the country (referred to as “opportunity zones”). An investor that invests the proceeds of its capital gains in an entity that is formed to invest in businesses in opportunity zones is permitted to defer, or in some cases eliminate, the federal income tax that would otherwise be due with respect to these gains, and
at the same time receive a non-tax economic return of investment.
In short, here is how it works. Any taxpayer that realizes a capital gain may invest proceeds equal to the amount of that capital gain in the Opportunity Fund and defer the tax that would otherwise be due with respect to such gain until the earlier of (i) the date of which the taxpayer sells its investment in the Opportunity Fund or (ii) December 1, 2026. In addition to this tax deferral, a taxpayer can permanently eliminate a portion of that tax by holding the investment for a certain period of time. The taxpayer eliminates 10% of the gain when it holds the Opportunity Fund investment for a period of five years, an additional 5% if the taxpayer holds the investment for a total of 7 years, and can eliminate the entire gain in the new investment (up to the fair market value of the investment in the Opportunity Fund) if the taxpayer holds the investment for 10 years.
“Investment Results & Community Impact”
In addition to the significant tax benefits realized by the investor in the Opportunity Fund, the Opportunity Fund will invest in assets throughout the country that seek to generate additional pre-tax economic returns to the Opportunity Fund. Unlike the more restrictive 1031 exchange, there is no “like kind” requirement, opening up the investor for gains attributable to stocks, bonds, sale of business assets and any other capital gains an investor seeks to defer. The investments will generally consist of investments in commercial real estate and investments in cash-flow positive operating businesses.
Opportunity Fund Management
ICF will serve as the manager of the Opportunity Fund. In its capacity as manager, ICF will manage all aspects of the Opportunity Fund’s investment portfolio, including (1) finding appropriate and qualifying investments in Opportunity Zones; (2) underwriting such investments to ensure qualification for the appropriate tax benefits; (3) coordinating with legal counsel to document and close the investment; (4) manage the Opportunity Fund’s investments throughout the duration of the Opportunity Fund’s ownership of the investment; (5) fund tax returns, reporting, etc.
The Opportunity Fund will seek to identify investments that generate a pre-tax IRR of at least 6% – meaning that investors would receive
a return equal to its initial capital contribution plus an additional 6%. Of course the actual return on an investment could be more or less than this base-line IRR depending on the performance of the investment. The investor’s return is preferred over payments to ICF other than the management fee.
Factoring in the tax benefits associated with the investment in the Opportunity Fund increases the IRR from the base-line of 6% to as high as 9% or more (assuming that the investor holds the investment for 10 years). – which is an increase of over 50%.
The Opportunity Fund will seek to further increase this IRR by identifying investments that qualify for other state and local incentive programs, such as new markets tax credits, historic tax credits, property assessed clean energy [others].
Invest with Us
The information contained herein is only intended to be a summary and you should speak with your own legal and tax advisors to determine whether an investment in the Opportunity Fund would be right for you.
We have much more information available to assist you in evaluating a potential investment in the Opportunity Fund. Please contact us for any questions or requests for additional information.
for free consultation