The Tax Cuts and Jobs Act of 2017 created new U.S. federal income tax incentives for certain investments in designated low-income census tracts known as “qualified opportunity zones” (OZs). The elements of this OZ regime have been refined by subsequent regulations, including the second installment of proposed regulations recently issued by the U.S. Department of Treasury (Proposed Regulations). The allure of these potential tax benefits has prompted numerous queries about structuring the so-called “qualified opportunity funds” (QOFs) to invest in OZs. In a guest article, Fried Frank tax partners Robert Cassanos, Colin S. Kelly and Libin Zhang address certain factors for private fund managers to consider when structuring QOFs to take advantage of the OZ regime. Specifically, this article outlines the new capital gain exclusions introduced by the Proposed Regulations and thoroughly considers the benefits and drawbacks of structuring a QOF as a two-tiered partnership or real estate investment trust. For more on the OZ regime, see “How Fund Managers May Deploy Opportunity Zone Funds to Defer and Partially Eliminate Capital Gains” (Apr. 30, 2019).