Tag: Opportunity Zones (OZs)

A new federal “Opportunity Zones” investment program – and its potential to boost job creation, entrepreneurship, and economic development in low-income communities – is the focus of a July 16 GlobeSt.com interview with Real Estate Roundtable President & CEO Jeffrey DeBoer and Roundtable SVP and Counsel Ryan McCormick.  With implementation guidance about the program expected soon from the U.S. Department of the Treasury, the article highlights the major tax considerations and regulatory questions for real estate, many of which are discussed in greater detail in The Roundtable’s June 28 Opportunity Zone comment letter.

Roundtable President & CEO Jeffrey DeBoer, right, and Roundtable SVP and Counsel Ryan McCormick, left, discussed the new federal “Opportunity Zones” investment program in a  July 16 GlobeSt.com interview.

• Last month, 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)

• DeBoer explained in the GlobeSt interview, “The point of the program is to encourage capital formation and patient, long-term investment in these areas by reducing or eliminating capital gains taxes for taxpayers investing in newly established Opportunity Funds.”

• McCormick told GlobeSt that property in an Opportunity Zone – real estate or otherwise – must be acquired by the fund after Dec. 31, 2017.  He added, “The law delegated many of the key implementation issues to the Treasury Department to resolve. These include: (1) how an Opportunity Fund is certified (2) how quickly must an Opportunity Fund deploy new capital, and (3) when has an existing real estate asset qualified as an eligible investment?”

• A July 13 Wall Street Journal article on Opportunity Zones reported, “Unlike earlier federal efforts to spur economic development in poorer communities, the program takes a free-market approach and isn’t backed with federal spending.”

• House Speaker Paul Ryan (R-WI) on July 12 spoke at length regarding the program before the Economic Club of Washington.  “With these opportunity zones, we are essentially offering private investors a set of incentives. The longer you maintain your investment in these areas, the more tax benefits you receive.  Right now, we have $6 trillion of unrealized capital that can be deployed to help alleviate poverty in distressed communities and improve people’s lives,” Ryan said.

• DeBoer also noted in the GlobeSt interview, “Investors and real estate fund managers are actively in the process of evaluating options, setting up funds, and conducting due diligence.  As time passes and the regulatory regimes takes shape, the pool of Opportunity Fund investors may grow.  We anticipate Treasury will soon issue guidance, hopefully within the next 30 days.”

The Roundtable Tax Policy Advisory Committee (TPAC) recently convened a panel on Opportunity Zones that included the tax counsel for Senator Tim Scott (R-SC), the original author and sponsor of Opportunity Zone legislation.  TPAC’s Opportunity Zone Working Group will continue to provide insight into how the industry can help the program fulfill its ambitious objective of stimulating economic development and job creation. (Roundtable Comment Letter, June 28)

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)

The Real Estate Roundtable provided  formal comments  regarding implementation guidance for newly designated Opportunity Zone communities.

• “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.

The Roundtable comments are the product of The Roundtable Tax Policy Advisory Committee (TPAC) Opportunity Zone Working Group.  TPAC recently convened a panel on Opportunity Zones that included the tax counsel for Senator Tim Scott (R-SC), the original author and sponsor of Opportunity Zone legislation.