Proposed Opportunity Zone Regulations Released by U.S. Treasury Department

October 22, 2018

Source: Captain Planet
Department: Brownfield Listings

Treasury has released proposed regulations on opportunity zones designed to incentivize investment in domestic communities.
When the new Opportunity Zone legislation passed, new promise for the communities within the Opportunity Zones was born. Since then, we have patiently waited for the Treasury Department to finish Congress work and fill in the detail necessary to implement the new Opportunity Zone law.

The framework for Opportunity Zone tax incentive was established by the Tax Cut and Jobs Act of 2017, which included a number of provisions designed as positives for real estate development. Like the brownfield reauthorization bill (the BUILD Act) passed in the big omnibus bill earlier this year, this Congress and White House have consistently demonstrated their mutual focus on catalyzing real estate investment.

Last week, Treasury unveiled a series of new rules and regulations with important implementing details designed to provide public and private sector market participants the certainty they need to effectively utilize this new investment opportunity. Investors, in particular, need the kind of crystal clarity they can rely on as to the tax implications of investing in the newly designated Opportunity Zones before they will invest. The new rules, the Treasury Department hopes, will provide the answers about Opportunity Zones in the air since the new legislation passed.

Earlier this year, the Treasury Department identified 8,761 communities as qualifying Opportunity Zones. Approximately 35 million Americans live in areas now designated as Opportunity Zones and the unemployment rate is nearly 1.6X higher than the national average, according to Treasury. Furthermore, based on data from the 2011-2015 American Community Survey, the designated regions had an average poverty rate of over 32%, compared with the 17% national average.

The tax benefit created by the new Opportunity Zone legislation is designed to spur economic development and job creation by encouraging long-term investments in economically distressed communities nationwide, according to the Treasury.

We anticipate that $100 billion in private capital will be dedicated towards creating jobs and economic development in Opportunity Zones, said Secretary Steven T. Mnuchin. This incentive will foster economic revitalization and promote sustainable economic growth, which was a major goal of the Tax Cuts and Jobs Act.

The Opportunity Zone tax incentive offers capital gains tax relief to investors for new investment in designated areas. Investment benefits include deferral of tax on prior gains as late as 2026 if the amount of the gain is invested in an Opportunity Fund. The benefits also include tax forgiveness on investment gains if the investor holds the investment for at least 10 years. Opportunity Zones retain their designation for 10 years, but under the proposed regulations, investors can hold onto their investments in Qualified Opportunity Funds through 2047 without losing tax benefits.

Read the entire article Proposed Opportunity Zone Regulations Released by U.S. Treasury. Department

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