Opportunity Zones: The Second Wave of Regulations Explained
02.05.2019 | Sullivan Conference Center, Boston, MA
The long-awaited second round of Opportunity Zone (“Ozone”) Proposed Regulations were issued Wednesday, April 17, 2019, providing further guidance on the tax incentives under Code Section 1400Z–2 (the “OZ Act”).
Since being enacted as part of the 2017 Tax Act, Ozones have developed into a large – and now perhaps enormous – factor both in U.S. income taxation and in the U.S. economy. Ozones have been called “the most impactful program for economic development in our lifetime.”
This interactive panel of Sullivan attorneys and industry experts will review in careful detail both the major pronouncements and hidden nuggets in the latest Treasury guidance, and will provide a number of practical examples on how to structure Ozone investments in light of this new information.
The Treasury Department provides detailed further guidance on many of the unanswered and remaining questions on how to implement an Ozone project. The new guidance includes:
- Original Use commences on property acquired by purchase when that property is first placed in service for purposes of depreciation or amortization.
- There is no original use requirement for leased tangible property and no “substantial improvement” requirement. The lease can also be with a related party, subject to certain anti-abuse requirements.
- The 50% gross income test (a requirement for a Qualified Opportunity Zone Business) can be satisfied by meeting any one of three alternative safe harbors, or a catch-all “facts and circumstances” test. The three safe harbors are based on the percentage of hours worked in the Ozone, the percentage of salary paid for work in the Ozone and management and operational functions generating income in the Ozone.
- Leased tangible property can be Qualified Opportunity Zone Business Property if two criteria are met: (1) lease was entered into after December 31, 2017 and (2) substantially all the use of the leased property is in a Zone for substantially all of the lease period.
Please come join us for a sophisticated analysis of these new Proposed Regulations and learn how you can benefit from the extremely attractive tax incentives provided in the OZ Act. Please register for the event at Sullivan.