U.S. Treasury, IRS issue regulations on investment in Opportunity Zones

Key Takeaways

The U.S. Department of Treasury and the Internal Revenue Service released proposed regulations and guidance Oct. 19 on investment in Opportunity Zones, a newly enacted federal program that aims to spur investment in economically disadvantaged Census tracts.

The regulations will help investors and local governments determine the types of development eligible for Opportunity Zone investments and will provide more details about the tax benefits for investors.

Do More

Read the proposed regulations and guidance

Submit comments on the regulations by Dec. 14

If your county has designated zones and you are in the process of working to secure investments, have information, lessons learned or best practices to share, please share them with Daria Daniel and Jack Peterson. 

See the complete list of designated Opportunity Zones

The agencies are seeking comments on the proposed regulations, and counties are encouraged to submit their comments by the deadline of Dec. 14 here.

In December 2017, President Trump signed into law the Tax Cuts and Jobs Act (H.R. 1), which authorized the designation of Opportunity Zones to spur investment in distressed communities throughout the United States, by offering tax incentives for investments in those areas.

Each governor nominated local areas within their state for these designations, and the U.S. Treasury reviewed these areas and designated a total of 8,761 zones.

All 50 states, the District of Columbia and five U.S. territories have designated opportunity zones, which will retain that designation for the next decade. 

Opportunity Zone investors will benefit from tax deferment on capital gains invested in a Qualified Opportunity Fund (QOF) until Dec. 31, 2026. If the QOF investment is held for at least five years, there is a 10 percent exclusion of the deferred gain. If held for more than seven years, the tax deferment increases to 15 percent. If an investor maintains the investment in the QOF for more than 10 years, the investor is eligible for an increase in basis of the QOF investment equal to its fair market value on the date that the QOF investment is sold or exchanged.