What factors do law firms base their opinion letters on in an OZ deal?

Answers

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  Peter McNeil

  Comprehensive Financial Solutions and Tax

  September 12, 2019

  Many sophisticated investors will not invest without seeing a legal opinion letter. It is also good to get a legal opinion as a double check on the proper setup and operation of the fund. The legal opinion may give you peace of mind, but will never guarantee your deal is totally legal. Change in regulations or change in legislation can make an opinion worthless. Also, look at the final wording of the opinion. It may only say more likely than not to be legal or, even worse, indicate that the deal will likely fail. Be careful of any law firm that guarantees a favorable legal opinion.

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  Matthew Rappaport

  Falcon Rappaport & Berkman

  September 11, 2019

  A tax opinion qualified under IRS Circular 230 protects the recipients from tax penalties (not the tax itself, or interest thereon). A tax opinion also allows an investor's own advisors to see what conclusions the sponsor's tax counsel relied upon to render advice.

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  Valerie Grunduski

  Plante & Moran, PLLC

  September 23, 2019

  I cannot speak to legal opinion letters, but we have been providing a similar report from our CPA firm that compares the business plan and intentions of a QOF and underlying business against the requirements in the statute. We then are able to provide a type of comfort letter to investors that clarifies that if the fund operates as they have stated, the fund will satisfy requirements.

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  Matt Campbell

  Hall Estill

  September 11, 2019

  Opinion letters are for the benefit of investors that an independent and respected firm has thoroughly reviewed and done due diligence on the operations to provide the opinion that a particular Opportunity Zone investment will be qualifying and meet expected tax expectations. I would think they're more beneficial for OZ operating businesses at this point due to limited guidance there. Multi-asset real estate funds may also require or benefit from them. I think they will be less used in single-asset deals.

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  Brad Cohen

  Jeffer Mangels Butler & Mitchell

  September 11, 2019

  Opinions are good if not too expensive.

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  Guy Nicio

  Windes

  September 12, 2019

  I am a tax CPA and my firm is an accounting firm. Our expertise is tax compliance. I am not familiar with what law firms are doing, but it's not hard to imagine that someone would want to have a lawyer's opinion and interpretation of the tax law since the regulations are only in the proposed state and not yet final. Though any smart/careful law firm would not provide any guarantees on their opinions since the legal interpretations are "literally" not final until the government issues final regulations.

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  Maria De Los Angeles Rivera

  Kevane Grant Thornton

  September 14, 2019

  Investors will always look to obtain some level of comfort when choosing where to put their money. Opinions provide certain level of confidence, but are not insurance. The extent of opinions or documentation may also depend on the relation between the investors and the funds and the investments the fund makes.

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