As part of the 2017 Tax Cuts and Jobs Act (“Act”), Congress introduced new tax incentives for investments in low-income communities designated as “Qualified Opportunity Zones” (“QOZs”). Under sections 1400Z-1 and 1400Z-2 of the Internal Revenue Code, investors can now defer and/or reduce certain taxable gains reinvested into “Qualified Opportunity Funds” (“QOFs”) that invest in QOZs.
The IRS released its first set of proposed regulations regarding QOFs on October 19, 2018 for public notice and comment (“Proposed Regulations”).1 The Proposed Regulations provide fund managers and investors with much needed guidance regarding QOFs, and we expect to gradually see increased demand for QOFs in 2019 as a result. The 60-day notice and comment period has ended, and the public now awaits the IRS’s review of all comments and issuance of a final rule. Below is a general overview of QOFs and the potential tax benefits of investing in them.