On April 17th, the second round of proposed regulations for Opportunity Zones (OZ Program) were released. The OZ Program is intended to spur investment in economically distressed communities and promote long-term economic growth in those communities through a variety of special purpose investment vehicles that provide significant tax benefits discussed in more detail below.
There is a great deal of interest in the OZ Program proposed regulations due to the expected economic impact of the program and associated tax benefits for investors. Treasury Secretary Steven Mnuchin has stated that he believes the OZ Program would encourage over $100 billion of investment in areas designated as qualified opportunity zones (OZs).
The newly proposed regulations address numerous key operational and exit issues that have created uncertainties and obstacles to the expected large flow of capital into the OZs.
Although the proposed regulations did not address all taxpayer concerns and issues still remain, the proposed regulations answer many questions that were impeding both investors and QOF sponsors from advancing under the program. In particular, a variety of helpful guidance for businesses outside of real estate should increase the attractiveness of the program to those businesses. As a result we expect these rules will continue to increase the flow of capital into OZs.
Principal, National Real Estate Tax Technical Leader, PwC US