Weed Industry Sees Potential in ‘Opportunity Zone’ Breaks

The question has bubbled up at various trade conferences in recent weeks, and the IRS doesn’t yet have an answer: Can investors use the 2017 tax overhaul’s “opportunity zone” incentives to fund a cannabis upstart?

The issue may boil down to a more biblical query—namely, whether something federally illegal can be considered a “sin.”

The 2017 law allowed investors who place capital gains in opportunity funds to defer capital gains taxes, and even reduce those liabilities if they hold their investments for more than five years under tax code Section 1400Z-2. If investors park money in the projects ...