Executive Summary. Over the holiday break, the US Treasury Department released final guidance on the Opportunity Zones incentive. That final guidance was published in the Federal Register on January 13, 2020. To spare you from reading 136 pages of final text, Opportunity Alabama has compiled a comprehensive summary of the new regulations.
- Investors with gains from sale of tangible property used in the course of a trade or business (1231 gains) have a much clearer path to investment.
- Additional guidance around qualifying operating businesses for investment has created an even clearer pathway for OZ investment in startups and existing businesses.
- Operating businesses and major real estate developments now have a longer deployment cycle (up to 62 months) to spend down capital raised.
- Developers of vacant property and brownfield sites have significant new advantages when it comes to qualifying their projects for potential OZ investment.
- Developments straddling a boundary between an OZ and a non-OZ now have an interesting new path to becoming a qualified OZ business.
- Businesses with multiple assets may now find it far easier to meet the “substantial improvement” test because of new property aggregation rules.
For those interested in learning more, please review our comprehensive regulatory update, available here. This summary presents an integrated view of the current regulatory landscape around Opportunity Zones, synthesizing the final regs with the statute and the two prior rounds of guidance. As always, this synopsis is not intended as tax or financial planning advice, and we strongly recommend that you reach out to us or speak with your tax professionals before getting engaged with Opportunity Zones.
For more information on how these final regulations impact your OZ investment plans, please contact us.