The long-awaited finalization of the rules governing opportunity zone investing are finally ready — but there’s one final step.
On Friday, December 6th, the IRS and Treasury Department submitted their final set of regulations to the Office of Management and Budget, which will now review them before they can be released to the public. The proposed regulations include what types of property qualify as Qualified Opportunity Zone Business Property, guidance on the penalty imposed for failure to meet investment standards, and reporting requirements for Qualified Opportunity Funds when an investor divests from the QOF. The Office of Management and Budget has 30 days to review the third set of regulations. Currently, investors are looking to capitalize on a Dec. 31 deadline to receive a 15% tax discount on capital gains invested into qualified opportunity funds.
Steve Glickman, who helped craft the policy when he was with the Economic Innovation Group, believes the floodgates of investment will open as some had expected when opportunity zones were first created. “I think it will have a huge impact on investment activity, particularly from the biggest-ticket institutional, corporate, and high net worth investors who are more risk-averse and can wait to see how the regulations shape out,” Glickman said. According to a report from Novogradac, opportunity funds have targeted about $64B in capital raising, and have met about 15% of that goal, which amounts to about $10B. That would make it the most lucrative federal tax incentive program this year, ahead of the New Markets Tax Credit.
The total number of census tracts certified as Opportunity Zones by the U.S. Treasury.
Potential unrealized capital gains eligible for Qualified Opportunity Fund investment and tax treatment.
Treasury Secretary Steven Mnuchin’s estimate of private capital that will flow into Opportunity Zones.