IRS and Treasury Announce First Opportunity Zone Designations


On April 9, 2018, the U.S. Treasury and the IRS designated the first “qualified opportunity zones” in 18 states. A list of the designated opportunity zones is available here.

The U.S. Tax Cuts and Jobs Act (the “Act“), signed into law on December 22, 2017, created a process to designate certain low-income community census tracts as “qualified opportunity zones.” Investments in opportunity zones receive preferential tax treatment. The provision is designed to encourage investment in these low-income areas.  States were required to nominate low-income communities to be designated as qualified opportunity zones, or request a 30-day extension to submit the nominations, by March 21. The U.S. Treasury then has 30 days from the submission date to approve the designations. On April 9, the designations for all states that submitted by the March 21 deadline were announced.

Under the Act, the designated opportunity zones will retain the designation for 10 years. Tax on prior gains can be deferred until no later than December 31, 2026, so long as the gain is reinvested in a “qualified opportunity fund”, an investment vehicle organized to make investments in qualified opportunity zones. In addition, if an investor holds an investment in an opportunity fund for at least 10 years, the investor is eligible for an increase in its basis. According to the U.S. Treasury press release announcing the first designated opportunity zones, U.S. Treasury and the IRS plan to issue additional information on the certification of opportunity funds under the Act.