Guidance issued on opportunity zone investments
Washington, D.C. — The Internal Revenue Service issued proposed regulations in mid-April offering further details about investment in qualified opportunity zones, a provision of the Tax Cuts and Jobs Act aimed at spurring real estate investment in communities. The proposed regulations permit the deferral of all or part of a gain invested in a Qualified Opportunity Fund, or QO Fund, that would otherwise be includible in income. The gain is deferred until the investment is sold or exchanged or Dec. 31, 2026, whichever date comes earlier. If the investment is held for at least 10 years, investors may be able to permanently exclude the gain from the sale or exchange of an investment in a QO Fund.
The new guidance aims to make it easier for opportunity zone funds to ensure compliance with the requirement that a fund has 90 percent of its assets invested in opportunity zones and expands the working capital safe harbors. The proposed regulations also provide clarity on treatment of gains on long-term investments, ownership and operation of the business, and what constitutes “qualified opportunity zone business property.”