How to Defer Capital Gains Tax with a QOZB Investment in Solar Manufacturing
By Charles Schaffer
Do any of the following capital gains scenarios apply to you?
You recently sold your business
You sold your founder's shares in a startup
You were part of a private equity exit
You missed out on a 1031 exchange after selling a real estate property
If so, you can benefit from tax-advantaged Qualified Opportunity Zones (QOZs), which were added to the tax code in late 2017.
As you may know, the 2024 long-term capital gains tax rate is 20% for heads of household with over $551,350 in taxable income. The rate is 15% for heads of household with a taxable income of $63,000 to $551,350.
Also, a 3.8% Medicare surtax, a.k.a. Net Investment Income Tax (NIIT), is charged to those who have investment income and modified adjusted gross income over $250,000 for joint filers, $125,000 for married filing separately, and $200,000 for all other filers.
QOZs and Tax Advantages
According to the IRS, "A QOZ is an economically distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment."
The 2017 tax code change spurred the creation and growth of QOZ investment funds.
Since 2018, the most popular QOZ investments for those with significant capital gains tax exposure have been real estate-focused QOFs (Qualified Opportunity Funds). These funds have ranged in scope from multifamily housing to hotels to commercial buildings.
An emerging alternative exists with a higher potential return than real estate.
This lesser-known alternative for capital gains deferral is a QOZB (Qualified Opportunity Zone Business) investment. A QOZB is a business operating in a Qualified Opportunity Zone.
One such example of an alternative market for QOZ investing is the solar power generation business sector, which is experiencing explosive growth.
While the IRS QOZ tax code did not create this industry, another IRS tax code change, the Inflation Reduction Act of 2022, offers significant Federal tax credits and cash toward its growth over the next eight years.
SDC Energy's Role
For years, SDC has focused its investment efforts on solar-related projects, including nonprofit solar array installations and utility-scale solar projects.
SDC has an investor opportunity for a tax-advantaged Opportunity Zone business with Inflation Reduction Act cash benefits as part of this solar industry focus.
That business is PANASOL USA, a domestic solar panel manufacturing plant. The plant is located in a QOZ in College Station, Texas.
The combination of profit from business operations and the Inflation Reduction Act incentives virtually guarantees the return of capital before the QOZB-deferred capital gains tax is due.
If you want to learn how to defer capital gains tax until 2026 and pay the tax through highly profitable, tax-free business cash flow, please schedule an online meeting with me or visit our investor portal.
Charles Schaffer
President and Founder, SDC Capital Ventures
Charles has founded and operated several development companies over his 35+ year history to pursue his passion for Alternative Investing where he believes outsized returns can be achieved without a corresponding increase in risk. Under Charles' leadership, SDC has developed and financed over $80 million of commercial real estate and renewable energy projects.
