The Treasury Department today released Proposed Regulations giving investors added guidance regarding the new "Opportunity Zone" investment program. The Real Estate Roundtable's Tax Policy Advisory Committee (TPAC) Opportunity Zone working group will analyze the much-anticipated regulatory proposal and their consequences for real estate-related jobs and investment. (IRS proposed rules, Oct. 19)
In late June, The Estate Roundtable provided formal comments to Treasury Department and IRS officials regarding implementation guidance that could maximize real estate investment, capital flows and jobs into newly designated Opportunity Zone communities. (Roundtable Weekly, June 29)
"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."
Congress created Opportunity Zones in the 2017 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.
The Treasury in June 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)
Certain elements of the Proposed Regulations may be relied upon immediately, whereas others will take effect when final regulations are issued. Comments are due 60 days after the proposed guidelines are published in the Federal Register, and a hearing will be held on January 10, 2019.