IRS Releases Second Set of Opportunity Zones Guidance

In October 2018, the IRS published the first set of proposed regulations providing much of the direction taxpayers had been seeking. And while those regulations represented a step forward in understanding how to implement an Opportunity Zone project, many questions remained. Recently, the IRS sought to address many of those questions by publishing a second set of proposed regulations.

The 169-page document provides guidance on a range of technical issues that investors, fund managers, and other stakeholders have been waiting for clarification on. These regulations provide much needed clarity on conducting an operating business within a qualified Opportunity Zone, while also providing additional flexibility for qualified Opportunity Funds that wish to purchase raw land, lease property to be used in their business, receive ongoing inflows of invested capital, or dispose of assets and reinvest the proceeds in replacement property. In addition, the latest regulations provide relief for those investors who don’t sell their interest in a qualified Opportunity Fund after 10 years, but rather cause the Opportunity Fund to sell its assets.

The proposed guidance notably doesn’t include reporting requirements. But the Treasury also released a request for information on data collection and tracking for Opportunity Zones. It’s expected that reporting requirements will be addressed in the coming months.