On April 17, 2019 the U.S. Department of the Treasury issued its second set of regulations related to the qualified opportunity zones tax incentives. This set of incentives provides additional guidance and introduces more flexibility in structuring business arrangements to satisfy the QOZ regulations.
The proposed regulations provide this guidance under new §1400Z-2 of the Internal Revenue Code (IRC) relating to gains that may be deferred as a result of a taxpayer’s investment in a qualified opportunity fund (QOF), as well as a special rules for an investment in a QOF held by a taxpayer for at least 10 years.
Section 1400Z-1 provides procedural rules for designating qualified opportunity zones and Section 1400Z-2 provides two main tax incentives to encourage investment in qualified opportunity zones. First, it allows for the deferral of incentives in gross income of certain gains to the extent that a taxpayer elects to invest a corresponding amount in a QOF. Second, it allows for the taxpayer to elect to exclude from gross income the post-acquisition gain on investments in the QOF held for at least 10 years. Further, with respect to the deferral of inclusion in gross income certain gain invested in a QOF, §1400Z-2 permanently excludes a portion of such gain if the corresponding investment in the QOF is held for five or seven years.
The proposed regulations address several issues including an expansion of the working capital exception rule, special election for investors in QOF partnerships and S Corporations, the 90% assets test and several other matters.
A public hearing is scheduled for July 9, 2018 at 10:00 a.m. at the New Carrollton Federal Building at 5000 Ellin Road in Lanham, Maryland 20706.
About the author
Joe is a 2004 graduate of Mount Saint Mary’s University, with a bachelor’s degree in accounting. He is also a 2000 graduate of Archmere Academy in Claymont, Delaware. Joe started with the firm in 2002 as a part-time intern, joining full-time in 2004.
Since then, he has worked with a myriad of clients, including entrepreneurial firms, agricultural businesses and nonprofit entities, including those with OMB A-133 audits. Joe, along with the firm, contributes to Toys for Tots, Goodwill Industries, as well as several other community organizations. He is a member of the American Institute of Certified Public Accountants and the Delaware Society of Certified Public Accountants.