Law360 – The Office of Management and Budget’s Office of Information and Regulatory Affairs is reviewing a second set of proposed regulations on qualified opportunity funds, according to the agency’s website. An opportunity fund is an apparatus created by the 2017 Tax Cuts and Jobs Act via Internal Revenue Code Section 1400Z-2 , which allows investors to divert unrelated capital gains into opportunity zone funds to gain tax advantages in the new investments.
Opportunity zones are low-income census tract areas, and the reinvestment of capital gains is intended to provide an economic boost to such locations. If an investor holds a qualifying opportunity zone fund for five years, 10 percent of capital gains will be forgiven. The OMB’s website explained the proposed regulation provides rules relating to how qualified opportunity funds will invest deferred gains into qualified opportunity zone property and qualified opportunity zone businesses.
Treasury in October released its first set of proposed opportunity zone rules, which explained that only capital gains – and not ordinary gains – could be used and that only individuals, partnerships, and some other pass-through organizations and C corporations may benefit from the opportunity zone program. A Treasury official confirmed to Law360 that these proposed opportunity zone regulations went to the Office of Information and Regulatory Affairs on Tuesday.