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IRS Releases Opportunity Zone Guidelines, Asks For Help Finalizing Them

Treasury Secretary Steven Mnuchin

The IRS and Treasury Department have released guidelines for investing in opportunity zones, but it is not the final step some were anticipating.

The Trump administration published a 74-page document Friday outlining what it called "proposed regulations that provide guidance" on the portion of the tax law passed at the end of 2017 that created Qualified Opportunity Zones for tax breaks to investors in those areas.

No timeline was set for when the guidelines would be finalized, but public comments are being accepted online and by mail ahead of a public hearing scheduled for Jan. 10. Several sections of the document solicit suggestions on how to further clarify the program, suggesting a document still very much in progress

Among the proposals is a provision allowing for individual members of a partnership to invest their own capital gains into an opportunity zone should the partnership as a whole choose not to do so. 

The six-month window for investors to elect to defer capital gains by placing them in a Qualified Opportunity Fund was among the most closely watched elements of the original bill, and the new proposal solicits suggestions for possible exceptions to that rule. Once funds have been placed in an opportunity fund, they can remain in that fund for 30 months, as long as a plan for investment exists and can be audited by the IRS, the Wall Street Journal reports.

The question of time frame has become crucial due to the delayed release of these guidelines, which were initially projected to be made public over the summer. Some investors have already launched opportunity funds ahead of any clarification of the guidelines, and for any capital gains invested in those funds, the clock is already ticking.

The law allows businesses operating within opportunity zones some tax breaks of their own, and the new proposals state that as long as 70% of a business' property sits within an opportunity zone, it can still receive the tax breaks, the WSJ reports. As yet, the proposals do not include requirements for hiring of opportunity zone residents or specific restrictions on what sort of businesses can qualify, according to the WSJ.