A Compendium of Qualified Opportunity Zone Proposed Regulations
On April 17, 2019, the Treasury Department released a second round of proposed regulations (the "4/19 Regulations") providing additional guidance on the implementation of the Opportunity Zone (“OZ”) tax incentive included in the Tax Cuts and Jobs Act. The 4/19 Regulations are taxpayer-friendly and expand upon (but in some cases modify) the guidance provided in the initial proposed regulations released on October 19, 2018 (the "10/18 Regulations"). This alert compiles both the 4/19 Regulations and the 10/18 Regulations and indexes the guidance in both sets of regulations with citations.
The OZ regime allows taxpayers to defer gains if such gains are invested in a properly structured qualified opportunity fund (a "QOF"). The 10/18 Regulations provide initial guidance on issues such as eligible taxpayers and gains, QOF investments, the self-certification process, and rules applicable to Qualified Opportunity Zone Business (a "QOZB") assets. The 4/19 Regulations provide expanded guidance on the OZ framework, including IRC Section 1400Z-2's interplay with the partnership tax regime, structuring QOF investments and asset acquisitions, and what it means to operate a QOZB.
Of particular note, the 4/19 Regulations:
This alert supplements our review of the 10/18 Regulations (available here) and provides a cumulative reference guide to the more significant information contained in both sets of proposed regulations. Although both the 10/18 Regulations and 4/19 Regulations are in proposed form, taxpayers may generally rely on the new guidance for a variety of important and previously unclear issues.
The following summary addresses particular issues related to qualified opportunity zone investments, the way in which the proposed regulations address the issue, and the citation to the proposed regulations. Citations to the 10/18 Regulations appear in red; citations to the 4/19 Regulations are italicized and appear in blue.
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