Today, the Department of Treasury released the first set of proposed regulations and a related revenue ruling for the opportunity zone incentives created by the Tax Cuts and Jobs Act of 2017, which was enacted December 22, 2017.
The proposed regulations address: (i) the types of gains that may be deferred by investors, (ii) the timing to invest such gains in qualified opportunity funds (QOF), and (iii) the manner to elect deferral of such gains. The proposed regulations also provide guidance for self-certification of the QOF, valuation of QOF’s assets and qualified opportunity zone businesses. Treasury will accept comments for 60 days. It is anticipated that additional guidance will be released by Treasury in 2019.
The Revenue Ruling 2018-29 provides guidance on the following: (a) whether the original use of an existing building located in an opportunity zones is considered to commence with the QOF; (b) whether substantial improvement to the building is measured by additions to the adjusted basis in the building only or the adjusted basis in the building and the land; and (c) if substantial improvement to the building is measured by additions to the qualified opportunity basis in the basis, is the QOF require to substantially improve the land separately.
The Internal Revenue Service has also updated its Opportunity Zones Frequently Asked Questions to reflect the regulations and Rev. Rul. 2018-29.
Butler Snow will provide a more detailed update to The Tax Alert: A Primer on the New Federal Qualified Opportunity Zones Provisions incorporating the proposed regulations and revenue ruling.
Ms. Wicks is a tax and business attorney and a member of Butler Snow LLP’s Business Services and Public Finance practice groups in the firm’s Ridgeland, Mississippi office.Ashley N. Wicks