OPPORTUNITY ZONES - June 22, 2018 - Roundtable Weekly

Treasury Designates More than 8,700 Census Tracts as Opportunity Zones  

The Treasury Department on June 20 designated more than 8,700 low-income census tracts in the United States, Puerto Rico, and territories as qualified Opportunity Zones. (IRS Notice 2018-48)

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A Roundtable Tax Policy Advisory Committee working group is finalizing a comment letter to the Treasury Department and IRS with recommendations on how to structure implementing rules that facilitate productive real estate investment.

  • Congress created the Opportunity Zone tax incentive program in the Tax Cuts and Jobs Act. Incentives reward Opportunity Fund investors with a capital gains deferral or exclusion on their invested capital in low-income communities.

  • Opportunity Funds must invest in tangible business property located in a qualifying zone, which can include real estate, and the tax benefits are tied to the investment holding period.  The capital gain on an Opportunity Fund investment is excluded from tax altogether if the asset is held for 10 years or more. (Opportunity Zones: An Innovative Investment Vehicle Created by the TCJA , Accounting Today, June 6, 2018).

  • Real estate investment aligns with the underlying objectives of the Opportunity Zone program – job creation, infrastructure development and growth in the tax base supports local public services.

  • Opportunity Zones were the topic of a panel discussion at The Roundtable’s Tax Policy Advisory Committee (TPAC) meeting last week. Speakers included Shay Hawkins, Tax Counsel for Senator Tim Scott (R-SC), the original author or Opportunity Zone legislation. Treasury’s Tax Legislative Counsel Tom West also addressed a number of questions related to Opportunity Zones. 

A TPAC working group is finalizing a comment letter to the Treasury Department and IRS with recommendations on how to structure implementing rules that facilitate productive real estate investment.  The letter will address topics such as the Opportunity Fund certification process, the requirements necessary for real estate to be treated as a qualified Opportunity Zone investment, and the tax consequences of real estate asset sales and acquisitions by an Opportunity Fund during the holding period. 

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