Senate Majority Leader Mitch McConnell and Sen. Rand Paul, both Kentucky Republicans, urged Treasury Secretary Steven Mnuchin to address worries from opportunity zone investors that their funds won’t qualify for the break unless a certain amount of business property lies within the designated zone.
The 2017 tax overhaul, which created the tax incentives for investors in development of certain regions of the U.S., requires that “substantially all” of an opportunity zone fund’s property be within the opportunity zone. The proposed rules (REG-115420-18) define “substantially all” for this purpose as 70 percent.
The opportunity zone program involves an estimated $6 trillion in idle capital gains, making it an exceedingly attractive component of the tax law. Mnuchin has heralded the program, under tax code Section 1400Z-2.
- Constituents raised concerns over instances in which an opportunity zone business crosses the geographical line between zones designated and non-designated for tax breaks, and 70 percent requirement could hinder investments, McConnell and Paul wrote in a letter dated Jan. 7 and released Feb. 5 under the Freedom of Information Act
- “We urge you to promulgate a final regulation that offers more clarity and fosters solutions to the concerns we have expressed in order to encourage—rather than discourage—economic investment in distressed communities,” they said
- 144 census tracts in 84 counties in Kentucky qualify for the program
- NOTE: In another recent letter to Mnuchin, 16 lawmakers flagged their constituents’ concerns with regulations, but praised the 70 percent “substantially all” test and urged the department to include it in final rules
To read more from Daily Tax Report ® pleaseOR Request Trial