Treasury, following an assessment by the White House’s regulatory review office, tweaked proposed opportunity zones regulations to make it easier for investors to take advantage of the tax breaks. Treasury, after OMB’s review, added a “Special rule” to the proposed regulations that says if a fund purchases a building on land within an opportunity zone, only the building-not the land on which it sits-has to be substantially improved.
One change made to the proposed rules following OMB’s review would allow investors to hold onto opportunity zone investments made close to the program’s expiration date for an additional 10-year period. The published regulations said that investors could hold onto their June 2027 opportunity zone investments for the entire 10 years described in the tax law, plus an additional 10 years. The proposed opportunity zone regulations offer relief from the 90 percent asset test for certain types of investments.
The rules say funds investing in businesses-such as real estate development companies-that are rehabilitating or constructing tangible business property in an opportunity zone can count cash provided to those businesses toward the 90 percent test as long as it is used on the project within 31 months. OMB spent more than a month reviewing the opportunity zone regulations, which gave Treasury extra time to think some issues through, West said.