Proposed Opportunity Zone Legislation Seeks to Extend and Expand the Program
Last week, Congress introduced bipartisan legislation to enhance the Opportunity Zone (OZ) tax incentive. This legislation, known as the Opportunity Zones Transparency, Extension, and Improvement Act, will provide welcomed changes to the OZ program in several key areas. Although still in proposed form, the legislation would add several provisions to the OZ program, including the following:
- Extension of the program for two additional years. The OZ program is currently set to expire after December 31, 2026, and under this proposal, investors would have until the end of 2028 to consider investments in OZs.
- Allow “fund of fund” or “feeder fund” investment. Under existing regulations, a Qualified Opportunity Fund (QOF) is prohibited from investing in another QOF. Under the proposal, such investments would now be permitted. This will be a great new way for OZ project sponsors to aggregate and attract capital to their projects.
- Modification of qualified opportunity zone (QOZ) census tract designations. The proposal includes two changes to QOZ designations: (1) Certain existing QOZ tracts with high median family income would be required to sunset, and future investments into such tracts would not receive OZ benefits; (2) New QOZ tracts would be designated for certain zero-population census tracts which were formerly used for industrial purposes and also contain a brownfield site.
- Increased information reporting requirements. The proposal would require expanded informational reporting to be completed by QOFs, Qualified Opportunity Zone Businesses (QOZBs), as well as investors who have deferred capital gains by investing in OZs. Newly established penalties would apply for failure to comply with such information reporting requirements.
CLA will continue to monitor these exciting developments in the OZ program and will provide in-depth analysis in the coming weeks and months. If you have any questions on the proposed legislation, or would like to learn more about investing in OZs, please reach out to Brian Duren or Ben Darwin.
- Carey M. Heyman, CPA
- Managing Principal of Industry - Real Estate
- CliftonLarsonAllen LLP
- Century City (Los Angeles)
Carey is the Managing Principal of the Real Estate Industry at CLA. He is a trusted advisor with close to 20 years of experience providing accounting, assurance, tax, and consulting services to real estate industry owners, operators, family offices, developers and syndicators. Carey has a strong track record of helping clients build and retain capital by leveraging tax- and cost-saving strategies and employing tax credits and incentives. He also consults with high net worth individuals, large family groups, and owners of closely-held businesses on all aspects of tax planning, estate planning, and retirement planning.
Comments are closed.