Treasury Releases the Second Set of Proposed Opportunity Zone Regulations

Treasury Releases the Second Set of Proposed Opportunity Zone Regulations


By: Robert Cassanos, Colin S. Kelly, Libin Zhang

On April 17, 2019, the U.S. Treasury Department and the IRS released the long-awaited second set of proposed regulations on the Opportunity Zone regime, a U.S. federal income tax incentive program for certain investments in designated lower-income communities. The new regulations contain favorable guidance in many respects for Opportunity Funds and their investors, such as the original use test, the treatment of leased property and the treatment of refinancing distributions. They also provide helpful rules that may allow an investor to exclude gain after 10 years without selling its direct Opportunity Fund interest. The regulations leave some unresolved issues and traps for the unwary, including the treatment of section 1231 gain and its uncertain effect on partnerships and S corporations.

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