How Foreign Taxpayers Can Invest in Opportunity Zones, with Steve Christiano

Steve Christiano

What types of foreign investors may be ideal candidates for Opportunity Zone investing? And is there an opportunity for OZ fund sponsors to raise capital overseas?

Stephen Christiano is an associate tax director of Frank Hirth’s business tax group, specializing in U.S. business taxation and Opportunity Zones.

Click the play button below to listen to my conversation with Steve.

Note: This podcast interview was recorded in November 2019, approximately one month before the final regulations on Qualified Opportunity Funds were issued by the IRS.

Episode Highlights

  • Opportunities for fund sponsors to raise OZ capital outside the U.S.
  • Three types of foreign investors that are ideal candidates for OZ investing — 1) non-US taxpayers invested in U.S. real estate or partnerships; 2) Americans living abroad; 3) international family offices that invest in U.S. markets.
  • Types of capital gains that are eligible for non-U.S. persons.
  • The challenge of educating foreign investors of the Opportunity Zones tax incentive.
  • Some of the challenges and frustrations with headwinds facing the Opportunity Zone incentive.
  • Strategies for raising Opportunity Zone capital from overseas.

Featured on This Episode

Industry Spotlight: Frank Hirth

Frank Hirth

Founded in 1975, Frank Hirth is an international accounting and tax services firm headquartered in London, with offices in Wellington and New York. The firm specializes in U.S. and U.K. tax compliance, with particular emphasis on U.S. tax considerations for Americans living abroad or non-U.S. individuals and entities with American assets.

Learn More About Frank Hirth

About the Opportunity Zones Podcast

Hosted by founder Jimmy Atkinson, the Opportunity Zones Podcast features guest interviews from fund managers, advisors, policymakers, tax professionals, and other foremost experts in opportunity zones.


Show Transcript

Jimmy: Welcome to the Opportunity Zones Podcast. I’m your host, Jimmy Atkinson. And joining me on the program today is Steve Christiano, associate director in Frank Hirth’s New York office. Steve, thank you for joining me today and welcome to the podcast.

Steve: Thanks, Jimmy. It’s great to be here. And thanks for having me.

Jimmy: Absolutely. So, Steve, I know that Frank Hirth is a U.S. tax firm that advises both U.S. and non-U.S. individuals living abroad. And so I want our conversation today to focus on how the opportunity zone tax incentive can apply to both foreign individuals and to U.S. persons who are living outside of the U.S. and what implications that that may have for fund sponsors who are looking to raise opportunity zone capital and just make them aware of the fact that they do not need to restrict themselves to domestic capital raising. There are actually individuals outside of the U.S. who would be ideal candidates for investing in this program. So, to start us off, let’s speak to that group of people who are trying to raise opportunity zone capital here within the United States. Let’s say I’m an opportunity zone fund sponsor. What opportunities exist outside of the U.S. for raising capital?

Steve: Sure, Jimmy. That’s a great question, and I think it’s a question that, you know, not many fund sponsors are really thinking about. But just because, you know, a potential investor is overseas, you know, it does not discount them from trying to gain exposure into the opportunity zone fund program. So most of the fund sponsors are trying to raise capital here in the U.S., which that makes sense, but where they’re having struggles of raising capital in the U.S., they can certainly look to overseas investors. And I think most of the overseas investors you’re gonna find are Americans living overseas, let’s just point that out. Americans living overseas still have U.S. tax filing requirements. They’re subject to the same U.S. tax requirements that individuals here that are living here in the U.S. are.

I think, also, international families, so family offices abroad, are looking at these opportunity zone opportunities where they already have exposure into the U.S. market through various investments, and these are also the types of investors that are willing to have long-term investments that could see diversification play with opportunity zone projects, you know, if it fits their strategy. And just your basic non-U.S. person that’s overseas that has maybe invested in U.S. real estate, we see that a lot, especially in New York, where non-U.S. persons are setting up vehicles to invest into U.S. real estate. Those are also ideal candidates that could potentially diversify their portfolio to gain exposure into the opportunity zone program.

So I think those three, you know, types of investors are out there. I think they may not be as educated as our, you know, U.S. counterparts here in the U.S. are about the opportunity zone program, and we’re trying to educate them along the way that this is an option for them, that this program doesn’t just cater to U.S. people living here. If you have capital gains that are taxable in the U.S., this would apply to any type of investor, whether they’re U.S. or non-U.S.

Jimmy: Good. I wanna dive into that a little bit more going forward with our conversation today. But first of all, back up a little bit here, Steve, and get a little background on you, your career path, what’s led you to where you are today, and maybe you can also speak about Frank Hirth and the types of clients that your firm serves.

Steve: Sure, sure. I started out of college with Ernst & Young. I was in their financial services department. I was with Ernst & Young for five years. Most of my background is dealing with financial services type clients, so your PE fund, your fund-to-fund, all different types of partnerships. I moved on from Ernst & Young and joined Frank Hirth in 2011. I’ve been with Frank Hirth for eight years now. I can’t believe it’s been that long. Time flies when you’re having fun, I guess, but yeah, I’ve been with Frank Hirth since then.


I’ve been in the New York office. New York office has been open for over 11 years now. We’re headquartered out of London, and we’ve been in London for 40+ years. We’re a U.S./U.K. tax firm. In New York, we are primarily a U.S. tax operation. We deal with all different types of clients. I still deal with the fund side of clients, so a lot of private equity funds and fund-to-funds and family investment vehicles. You know, we’re not very industry-specific, but all of our clients have some sort of international flavor to them. So that’s clients that are overseas looking to get exposure into the U.S. for various reasons, and we also have clients that are moving into the U.S. They may be getting their green card, maybe expanding their business from overseas into the U.S.

So we see a lot of different types of clients here out of our New York office, mostly inbound to the U.S., whereas we also see outbound as well, but mostly inbound. And I’m able to, you know, look after a lot of the investment style clients that kind of fit the opportunity zone initiatives. We have real estate clients and your PE style clients that all, you know, are looking at opportunity zones, as we speak.

Jimmy: Right, good. You mentioned briefly, in the beginning, the three types of ideal candidates for opportunity zone investing. Can you go over those? Can you repeat those one more time for me and discuss those in a little bit more detail?

Steve: Sure. So any non-U.S. individual or entity, so the opportunity zone program is very flexible as far as what type of taxpayer is eligible to benefit from all of the opportunity zone capital gains benefits that the program offers. So these are any non-U.S. investors, they could be an individual, could be a C-corp, could be a partnership, trustees, etc. The key part for a non-U.S. investor, let’s just say, is either a non-U.S. individual or a non-U.S. corporation that’s investing in, let’s say, U.S. real estate. That individual or that entity, upon sale of that U.S. real estate, would be considered capital gains taxable in the U.S. So right there is a perfect example of many clients that we see that do get exposure to U.S. real estate that would be able to defer those capital gains into an opportunity zone investment. So I would say that’s one style of clients.

The second style of clients are Americans just living overseas. Like I stated before, just because an American citizen or a green card holder, for that matter, if they live overseas, they still have a U.S. tax filing requirement and are still taxed, as you and I are taxed, as Americans, but they just are taxed overseas, but they still have their filing requirements just like any other U.S. taxpayers. So those benefits for Americans living overseas are just like the benefits we have in the U.S. So any sort of capital gains from stocks, from bonds, from their investment portfolio, from the sale of their residence, real estate, etc., those would all be potential capital gains that could be invested into an opportunity zone fund.

I would say, also, international family offices. I think, just like opportunity zone fund sponsors are targeting family offices here in the U.S. because of the type of investor they typically are, international families as well are a prime candidate where they probably are already making investments into the U.S. as part of their global strategy. These are the types of investors that potentially would benefit from an opportunity zone project as well where they wanna diversify some of their portfolio. They may already have a U.S. portfolio in real estate, let’s just say, and they can, upon sale of that real estate, try to get exposure into this program and get a lot of different tax benefits that the program has to offer.

I will say, also, it’s not just real estate investments that non-U.S. people can utilize those capital gains into opportunity zones. So typically, in real estate, from a U.S. tax perspective, typically, real estate sales are going to be subject to either capital gains tax, long-term capital gains tax, or what we call section 1231 capital gains tax, which the regulations have clarified that 1231 gains, albeit a net gain, can be reinvested into an opportunity zone as capital gains and get all the benefits that the program has to offer.

With tax reform, there is another potential capital gain that is out there that now non-U.S. investors are subject to, and that’s, let’s say, a new section called 864(c)(8). And these are investments in U.S. partnerships that are engaged in U.S. trade or businesses. So this is typical with a PE structure. So if a non-U.S. investor is invested in one of these PE vehicles that are engaged in U.S. trade or businesses, if they dispose of their interest at a gain, then that capital gain is now subject to U.S. capital gains tax, which is quite different from pre-tax reform. But post-tax reform, it codified this rule. So it’s not just real estate gains that could potentially be rolled over, you also have potential capital gains from investments in U.S. partnerships that could potentially be taxable to a non-U.S. person that would be eligible.

Jimmy: Good. So it’s not just restricted to real estate quite clearly. It could be essentially any capital gain or a 1231 gain or an 864(c)(8) gain, as you just brought up. So if I am a non-U.S. individual, let’s say I’m in the U.K., possibly located near your London office even, and I have some capital gains tax liability in the U.S., because I’ve invested in real estate there or, potentially, I have an interest in a U.S. business partnership. Am I likely to be aware of the opportunity zone program, or has that been one of the biggest challenges to educate these foreign investors of this opportunity zone tax incentive? Because many people in the U.S. are not even aware of it. I can only imagine how difficult that must be for a foreign person who may have some capital gains tax liabilities here in the States. Can you address that?

Steve: Sure. So, well, if you’ve been following me and Frank Hirth, you may have gotten some materials out there already that we’ve been posting to our website, and LinkedIn, and various social media. But if that isn’t the case, yes, I do agree that the educational process overseas needs to be ramped up because that is, you know…I don’t think a lot of non-U.S. investors are thinking of that. And like you said, they may not even be aware that they are eligible to get the rollover treatment and all of the capital gains benefits that the program has to offer if they invest within a certain amount of time. So, yes, I think there is an educational process. We’re trying our best, of course, to promote this, specifically in London and with all of my international clients, to give them that option. You know, you really have to have a specific type of investor that’s willing to hold these types of investments for 10 years or more to really get the best bang for your buck.

But yeah, I think it’s a slow process. I think more and more people, as we start to promote this a little bit more, are seeing some of the opportunities. I have received some questions from our clients based in London in regards to the program. So getting out to the trustee companies overseas, getting out to those investors, those family offices that are overseas that are dealing with very sophisticated international clients that are high net worth, these opportunities are there for them to take advantage of, and I would certainly encourage it for the right type of clients.

Jimmy: Of course. What other efforts have been made to educate the foreign public of this incentive? You know, here, stateside, there have been dozens of conferences that have been put on this year by OZ Expo and Bisnow and Novogradac, just to name a few of the conference organizers. Has there been any conference circuit or event circuit that’s happened abroad, in London or around the U.K.? Not to pick on London too much, but I know that’s where you guys are headquartered.

Steve: Sure, sure. Not that I know of. To be quite honest with you, I’ve actually attended one of the OZ Expo conferences here in New York. But no, I think it would be a great idea for, you know, some of these organizations to really get out there. I haven’t come across any organizations that are similar to those that are doing…you know, that are promoting the OZ fund and the OZ initiative here in the U.S. But yeah, unfortunately, I haven’t come across any of those that are promoting this overseas, and I think there is a massive opportunity, specifically in London and probably, you know, in Asia and other countries around the globe that, you know, would benefit from programs like that. And we, at Frank Hirth, and myself, personally, are trying to educate our clients and try to get as much material out there to make sure that all investors that are investing into the U.S. market know exactly the types of benefits that they can take advantage of with the opportunity zone investments and that that’s there for them, and it’s not just U.S. investors.

Jimmy: Right. Well, it sounds like an opportunity for Frank Hirth. Maybe if you guys wanna put on an event in London, I would encourage you to do so. Who knows the types of people that you might get filing into that room if you’d put on an opportunity zone event for foreign individuals or U.S. persons living overseas who may have capital gains tax liability in the U.S. I think that’d be big if we could get something like that going in London or elsewhere in Europe or in Asia, as you mentioned.

Steve: Sure, sure. I will clear my schedule to go on a roadshow overseas anytime.

Jimmy: You should, you should. What have been some of the biggest frustrations or challenges in getting opportunity zone equity capital to flow into some of these qualified opportunity funds that you’ve seen on your end? I know you already spoke a little bit about the education component. I think that’s clearly a big hurdle. But any other frustrations or challenges with this incentive so far?

Steve: I just think the uncertainty, you know. The IRS and the government, you know, they’ve put out a lot of different regulations, which have been helpful. The first set of regs were towards the end of 2018, second sets of regs were earlier this year. Nothing’s been finalized to this point. And I think there’s a little bit of hesitation. Clearly, opportunity zones in certain areas are riskier investments, and you have to have the right investor that is willing to hold for the 10-year play. So you know, I think it’s a little bit of a struggle. I do think the educational…I think there’s a lot of material out there, and if people are using Google to search about opportunity zones, they may not be getting the right answers and maybe things aren’t as clear. But it’s certainly a massive program.

I’ve been to plenty of seminars and conferences. I think the government is doing their best to promote it. I also think that various people within the White House that are overseeing this program are trying to get out there to speak on many different types of events to really get people comfortable, and so there is less hesitation. But I do think that, you know, still, there is some uncertainty. There’s still some risk. And it’s really about, you know, what’s the best opportunity for that type of investor? Does it economically make sense? I think institutions are rolling more and more out on their platforms to get exposure to their clients within those institutions, and I think that’s been working out fairly well.

But I think where it’s been slow that I’ve been seeing is kind of on the more private side where entrepreneurs and different types of funds are trying to raise capital to get into different types of projects within opportunity zones where they have really good ideas, it’s just that they’re having a hard time to raise that capital. And I think it’s just a lot of, you know, hesitation, concern, and to some degree, uncertainty, you know, because we don’t have finalized regs just yet, I think there’s some hesitation.

But hopefully, going into next year, that if we see some of these opp zone funds that have already been created and already making investments, and you could see kind of the benefits that those funds are seeing, that will hopefully encourage more people and bring down the kind of levels of uncertainty for investors to kinda get…you know, to diversify some of their portfolio into some of these funds. So I think time will tell. But I know that a lot of funds are already out there operating, they’ve raised capital, they’ve raised their money. So I think it’s kind of a wait-and-see, and I think that’s what investors are also doing.

Jimmy: Right, yeah. A few headwinds that we’re facing here. One is the regulatory uncertainty. We’re still waiting on final rules from IRS. So some of these questions that you may have, not only is it hard to find the answer to a lot of the questions on this program, but in many areas, there actually literally is no answer because the IRS hasn’t given us the answer yet. And then another headwind that we’re facing certainly is just the fact that this incentive program is in its infancy, and you know, people are still kinda getting up to speed on what it’s all about and how to go about doing it. So I share your hope, your optimism that, you know, we’ll see some more capital hopefully flow in, in the coming years here.

Okay, Steve. So we discussed the three different types of foreign persons or Americans living overseas who may be interested in this opportunity zone tax incentive. We had the non-U.S. investors as group number one, and that splits into non-U.S. individuals and non-U.S. corporations. We had group number two as Americans living overseas, so U.S. citizens or green card holders, U.S. persons living abroad. And then number three, we had international family offices. All of those types of investors are certainly incentivized to take advantage of the opportunity zone tax incentive should they have capital gains tax liabilities in the U.S.

Wanted to shift back domestically now for a minute and consider this other group of people, which are the fund sponsors or the people who are attempting to raise capital for their qualified opportunity funds or underlying qualified opportunity zone businesses or real estate projects. They almost certainly have been focused solely on raising capital within the U.S. And you know, I asked you this question at the top of the program, but I want to drill into it a little bit more now. What are their opportunities for looking outside of the U.S.? I know that the market’s kind of been slow to develop because of some of the headwinds we just mentioned. I’m curious, you know, of all of the potential unrealized capital gains that are sitting on the balance sheets of individuals and corporations, do you know what percentage of it is within the United States versus what percentage of unrealized capital gains may be abroad? Like, how big is…I guess what I’m getting at is, how big is the opportunity to seek capital from outside of the United States?

Steve: You know, I’m not sure of the percentages per se, but what I will say is, working for a firm like Frank Hirth and being able to see a lot of international clients, that investment into the U.S. is number one on their mind. The international clients, of course, view the U.S. as a stable environment, you know. They want to invest into the U.S. They want their clients to invest into the U.S. Anything that they can do to gain exposure into the U.S. market and into U.S. investments, in particular, U.S. real estate, but also opportunity zone businesses, that has not slowed down by any means. I think it’s increased. I think, with tax reform, it’s made it a lot more attractive as well. You know, you see some of these countries abroad that are having negative interest rates and all kinds of issues. Whereas the U.S. is one of the best economies in the world, if not the best, is a stable environment, regardless of the political nonsense we see in the news all the time. But investors still view the U.S. as a safe haven for their clients, and I think that that will not slow down.

And I think this is an incentive to them. It’s an additional incentive to them and their clients that they’re serving overseas is that, you know, “Hey, you have some capital gains. You have some investments and real estate here. Let’s take a look at this new opportunity zone project. And oh, by the way, you get all these tax-free benefits if you hold it for 10 years or more.” Which there is no such thing in any part of the IRC code or the section code, there is no capital gains that are not taxable unless you invest in a qualified opportunity zone program. This is the only part of the code sections that allow you to do that and walk away tax-free on the appreciation of that opportunity zone investment. So it’s a way to not only get a good deal economically for their clients that are international, that are overseas, but also, you know, the rate of return that they’re looking at, at the end of the life of the investment, is substantial and significant. And I think that the first estimates about when the opportunity zone program first came out, I think I saw anywhere from $4 trillion to $6 trillion of unrealized capital gains out there that were subject to U.S. tax.

So you know, again, I think there’s a lot of international clients that are already investing into the U.S. market. And I think it’s just tapping into that and, you know, dealing with some of the trustees that are overseas and trying to get to their clients, you know, and like I said, just educating them that, “Hey, this is a benefit, and you should really look at this,” for their clientele. Because like I said, there is no downturn in investments into the U.S. More and more clients are investing into the U.S., so I don’t see that changing anytime soon.

Jimmy: Right. So it really does represent an incredible opportunity for fund sponsors who are looking to raise capital. You know, don’t just look to the U.S., but consider looking abroad as well. And I know that that’s a pretty good portion of our listening audience listening to this podcast right now, our project sponsors or fund sponsors who are struggling to raise capital. Steve, do you have any strategies or tips for those listeners who are looking to raise capital on how they can go about looking to raise capital, not just domestically, but specifically, how they can reach out to non-U.S. investors abroad or Americans living abroad? Do you have any tips or strategies for them?

Steve: You know, I think there’s a lot of opportunities in getting in front of trustees that are located in the Channel Islands, you know, BVI, Cayman, trying to get in front of those types of firms, because that’s where, you know, a lot of high-net-worth individuals are putting their money into various trusts that are located offshore. I would target them. I would target the family offices, international family offices that are located in London, that are located around the globe to try to get in front of them as best as they can to really educate them about different opportunities that they are trying to raise capital for. I think those two audiences would be the best start. And trying to do some seminars, maybe have…we’ve been thinking about, at least here in the U.S., I’ve been a part of some seminars that were targeting just kind of different types of firms, maybe they’re immigration firms or international wealth managers that are coming to some of our conferences and seminars about opportunity zones and what the benefits are on a very basic level.

So maybe trying to, again, like you were saying before, doing some type of roadshow or seminar overseas would probably make a lot of sense, or if they’re going to do it here in the U.S., trying to target that market, you know, and there’s plenty of international wealth managers that have offices here in New York, in particular, and elsewhere around the country. And immigration firms, I think, too, because a lot of people that are thinking about investments in the U.S. or coming to the U.S. or trying to get a green card but staying overseas, you know, those are potential avenues to also go down.

Jimmy: Good, yeah. A lot of opportunities out there to look abroad and not just to domestic investors. Steve, thank you for your time today. Thanks for joining us. Before we go, can you tell our listeners where they can go to learn more about you and Frank Hirth?

Steve: Sure, Jimmy. And thanks again for having me. I thought this was great. And I look forward to hopefully doing another podcast down the road. But anyone that’s listening, you could go to our website, My profile is also on our website. We have various articles in regards to opportunity zones that I’ve published that are on our website as well. So take a look at that. My email is [email protected]. If you have any follow-up questions, you can feel free to reach out to me. Frank Hirth, we’re all over LinkedIn and Twitter, so you could search us there as well. We’re always trying to stay up to date with various news that comes out on opportunity zones. And as regulations start to get finalized, as forms start to get finalized, we will keep everyone up to date, and you can see a lot of our articles that I’ve published on various social media outlets. So please go there. And thanks again for having me, Jimmy.

Jimmy: Perfect, absolutely. So for our listeners out there today, I’ll have show notes on the Opportunity Zones Database website for today’s episode. You could find those show notes at And there, you will find links to all of the resources that Stephen and I discussed on today’s show. Steve, again, this has been great. Thanks for joining me.

Steve: All right. Thank you. Take care, Jimmy.

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