Congress Seeks to Restore 15% Tax Reduction of Opportunity Zone Investments

Last week’s bipartisan proposal before Congress is of great interest. Basically, two senators have proposed an extension to the deferral on cap gain deposits into a QOF until 2028, which is two years longer than the current 2026 deadline.  Since the 2028 date is more than six years away, this deferral extension restores the 10% gain reduction investors receive upon holding a QOF investment for 5 years.  The bill also restores the 15% gain reduction by reducing the required holding period to 6 years from the 7 years previously required.

In addition to the extension, the proposed legislation will identify the few zones that are not truly impoverished and sunset them, freeing states to designate replacement, high-need communities as opportunity zones and enhance the ability for these lower income areas to receive dollar injections.

Furthermore, the proposal includes a recommendation to establish a $1 billion fund at the federal level to bring more dollars to the zones. As part of the plan there will be more transparency and accountability at the QOF and the QOZB levels to document and validate the impact and value of the Opportunity Zone investments. This is good news for the program.

We believe the proposal will be passed quickly and we will keep you posted.