Final Qualified Opportunity Zones/Funds Regulations Released by the Treasury Department and IRS

January 15, 2020

By Richard Shapiro

The much awaited final regulations on qualified opportunity zones (“QOZs”) and investing in qualified opportunity funds (“QOFs”) were issued by the Treasury Department and the IRS on December 19, 2019 and published in the Federal Register on January 13, 2020.  Covering 544 pages, these regulations attempt to address the numerous formal comment letters (over 300) and additional taxpayer feedback received in response to two sets of proposed regulations published on October 29, 2018 and May 1, 2019. 

In connection with the release of the final regulations, the Treasury Department and the IRS issued a list of frequently asked questions (“FAQs”) that describe key changes made to the proposed regulations on QOZs and QOFs.  These FAQs address the following:

  • What types of gains may be invested and when?
    • Sale of business property
    • Partnership gain
    • Investment in regulated investment company and real estate investment trust gains
    • Installment sales
    • Nonresident investment
  • When may gains be excluded from tax after an investment is held for a ten-year period?
  • Sales of property by a qualified opportunity zone business (“QOZB”)
  • Applicability to other gains
  • How does a QOF determine levels of new investment in a QOZ?
    • Aggregation of property for purposes of the substantial improvement test
    • Vacancy period to allow a building to qualify as original use
    • Leasing
    • Working capital safe harbor
    • Measurement of “use” for the 70% use test
    • Determination of location and “use” of intangible property
    • Other qualifications regarding business property of QOFs or QOZBs
  • How can large C corporations invest in QOZs?

EisnerAmper is updating its booklet Qualified Opportunity Funds: A Guide for Real Estate Investors to reflect the final regulations.  This update will be issued shortly. 

About Richard J. Shapiro

Richard Shapiro, Tax Director and member of EisnerAmper Financial Services Group, has over 35 years' experience in federal income taxation, including the taxation of financial instruments and transactions, both domestic and international.