The Real Estate Roundtable on Thursday provided formal comments to Treasury Department and IRS officials regarding implementation guidance that could maximize real estate investment, capital and jobs into newly designated Opportunity Zone communities. Last week, the Treasury Department formally 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 and Roundtable Weekly, June 22)
“Real estate development and redevelopment is a key component of any region’s economic strength and growth,” wrote Roundtable President and CEO Jeffrey DeBoer. “In our view, successful implementation of the Opportunity Zone program requires careful consideration of how the new rules will apply to real estate and real estate investment activities.”
The Roundtable comments focus on: the certification of Opportunity Funds; the deferral or exclusion of gain; and the Opportunity Fund asset test, including questions regarding when real estate improvements constitute a qualified investment.
Congress created Opportunity Zones in the Tax Cuts and Jobs Act to encourage long-term, capital investment in economically struggling, 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.