In The (Opportunity) Zone: Final OZ Regulations Provide Needed Clarity

The long-anticipated Final Regulations under Code Section 1400Z–2 (the “OZ Act”), were issued on December 19, 2019, and the great news is that these regulations are far more flexible, pragmatic and useful than the two earlier sets of proposed regulations. In fact, the Treasury did an outstanding job of getting everything (or almost everything) right this time around. In the Final Regulations the IRS kept and improved on the best parts of the proposed regulations, while correcting most – though not all –  of the obvious problem areas.

A fair conclusion is that the OZ Act is now where it needs to be: it has gone from an intriguing idea with tantalizing tax incentives but often paralyzing uncertainty, to a fully functional tax-incentive regime that seems ready to achieve its ambitious public policy objectives.

This seminar reviewed the Final Regulations from a functional and pragmatic standpoint, looking both at high-level policy issues and specific implementation details, including the following:

• How to set up a Qualified Opportunity Fund (QOF) and a Qualified Opportunity Zone Business in the most efficient manner under the Final Regulations
• How to “harvest” and then “reinvest” eligible gain successfully within the statutory and regulatory time limitations
• The types of “gain” eligible for investment in a QOF, including the much-improved final rules with respect to Section 1231 property
• The favorable rules on how to invest gain from an installment sale transaction
• The generally favorable treatment of leased property as Qualified Opportunity Zone Business Property (QOZBP) and the ability to satisfy the 70% “substantially all” test with leased assets
• The favorable guidance on multi-asset QOFs, including the flexible disposition rules for QOFs held for more than 10 years
• Clear answers and remaining questions on how to move an existing business into an OZ versus create a new business in an OZ
• And much, much more

Panelists:

Benjamin Armour, Sullivan & Worcester 
Jill Homan, President, Javelin 19 Investments
Steven Kennedy, Partner, PwC
Ryan McCormick, Senior Vice President & Counsel, The Real Estate Roundtable
Nicholas Ratti, CohnReznick