For investors, the opportunity zones come with several tax advantages. Capital gains placed in a certified opportunity zone fund will not be taxed through the end of 2026 or when the investment is sold, whichever comes first. Any gains from the fund are permanently shielded from taxes if the investment has been held for 10 years. In addition, the initial investment will be discounted by up to 15 percent for tax purposes after seven years.
The guidance comes just weeks before the midterm elections. The GOP has struggled to sell its tax law to voters as the party tries to hold onto its House majority.
The proposed regulations clarify that only capital gains are eligible for preferred tax treatment. Investors who can participate include individuals, corporations, businesses, REITs and estates and trusts. Treasury said additional guidance will be released before the end of the year, with final rules likely to come in the spring.
“We felt it was important to issue the core guidance now that’s needed to get the funds up and operating and not wait until we have every question answered,” said a senior Treasury official who declined to be named.