The Economic Innovation Group (EIG) is a bipartisan public policy organization combining innovative research and data-driven advocacy to address America’s most pressing economic challenges. They have been at the forefront of helping bring new jobs, investment, and economic growth to U.S. communities.
Their analysis of the proposed regulations and the revenue ruling is top notch. Among the most important to us include:
- Opportunity Funds must be classified as a corporation or partnership for income tax purposes, meaning a limited liability company (LLC) can qualify. Opportunity Funds must also be created or organized in one of the 50 U.S. states, DC, or a U.S. territory.
- Pre-existing entities can qualify as Opportunity Funds or Opportunity Zone businesses as long as they satisfy the necessary requirements.
- An Opportunity Fund must value its assets for purposes of the 90-percent asset test using values reported on the fund’s audited or filed financial statements (or using the cost of the assets if it does not have them).
- For purposes of determining whether “substantially all” of a business’s tangible property is Opportunity Zone business property, the proposed rules define “substantially all” to mean 70 percent or more.
- The accompanying revenue ruling proposed that, for purposes of determining whether an existing building on land in a zone has been substantially improved, the improvements need to double the owner’s basis in the building only — not in the land. Treasury intended this in part to encourage the repurposing of vacant buildings in Opportunity Zones.
The entire article offers excellent insights and we encourage you to read it in its entirety.