It has been almost a year since opportunity zones became the latest buzzword in real estate development. Across the U.S., investors have turned to this program to use unrealized capital gains to invest in low-income communities. In return, investors can defer capital gains tax and make a return on investment as the community flourishes.

But some investors remain hesitant to invest in opportunity zones, due to several gray areas in how investments are regulated. The U.S. Department of the Treasury has yet to release the regulations, leaving developers and investors in the dark.

“People are interested in them, but there are uncertainties in the law that are inhibiting investment in it at this time,” Berdon LLP Tax Senior Manager Mike Eagan said. “But regulations have been sent to the [Office of Management and Budget] for review, so they could be published in several weeks. This should clarify a lot of those uncertainties and speed up investment.”

One area of the program that requires clarification is whether, in the case of gains realized by joint-venture partnerships, the partnership must roll the gains into the qualified opportunity fund or the partner can roll its share of partnership gain into the fund. Another question is around the nature of the gains that can be invested in funds. While the statutory intent of the program applies to capital gains, the provision itself refers to any type of gains.

Regulations will hopefully shed light on these gray areas, Eagan said.

“What we are looking for is the regulation package to come out, and we will see what investors are really going to do,” Eagan said. “We will see how narrow or expansive those regulations are. We expect them to be fairly expansive because of existing program policies that encourage investment. But it should be interesting to see the impact.”

As a real estate industry tax specialist, Eagan has seen the potential for real estate development within opportunity zones firsthand. All types of real estate assets have been considered by developers, from hotels to warehouses. Because opportunity zones last for 10 years, they are ideal for long-held investments like low-income housing, which typically encourage investors to hold the asset for several years with regulated rental increases.

Investors, especially real estate developers, have remained selective about which opportunity zone funds to invest in, Eagan said. Not all opportunity zones are created equal, with some focusing on urban development while others have a more rural infrastructure. Across New York State, Gov. Andrew Cuomo nominated 514 local census tracts to participate in the program, which includes a broad mix of low-income communities primed for economic redevelopment.

Opportunity zone funds broadly support economic development via capital gains reinvestment from stocks, bonds, real estate, partnership interests or any type of investment. But it has been mostly real estate professionals that have seized the program as a way to take advantage of long-term tax deferral and higher returns on investment.

“I’ve seen mostly real estate developers and real estate investors that are looking to roll over capital gains in the more opportunistic opportunity zones,” Eagan said.

In Long Island, communities like Riverhead were among 10 approved by the Trump administration as opportunity zones. This could revitalize its downtown area that has suffered from a sluggish economy post-recession. With 8,300 underutilized acres of land near transit stations, Long Island developers have a resource of untapped potential, and recent improvements to railroad lines in both Suffolk and Nassau counties have increased the feasibility of developing transit-oriented destinations.

Once the regulations are released, investors will have numerous census tracts to choose from.

This feature was produced in collaboration between Bisnow Branded Content and Berdon LLP. Bisnow news staff was not involved in the production of this content.