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Scott, Booker Plan to Extend Opportunity Zone Incentives (1)

April 25, 2019, 5:33 PMUpdated: April 25, 2019, 9:48 PM

The original authors of the 2017 tax law’s opportunity zones tax breaks plan to introduce a bill that would extend an incentive that expires for investors who take advantage of the provision after 2019, an aide to one of the lawmakers said.

“The regulations have taken a little longer than anticipated,” said Shafron “Shay” Hawkins, legislative assistant to Sen. Tim Scott (R-S.C.). The bill, to be introduced with Sen. Cory Booker (D-N.J.), would move back by one year the start date of the tax breaks.

That would mean more investors could take advantage of the ability to shield 15 percent of the capital gains they invest in state-designated opportunity zones after holding onto the investments for seven years, Hawkins said April 25 at a Denver conference.

Hawkins said that “we’re working with legislative counsel” to figure out how to get around any limits on such legislation in light of the 2017 law’s budget restrictions, which span a 10-year window ending in 2026. The senators hope to release the bill soon after the recess, he said. Both chambers return on April 29.

A spokesperson for Booker’s office didn’t immediately respond to a request for comment.

Under tax code Section 1400Z-2, investors can defer tax on their stock profits and other gains if they invest in designated census tracts and exclude 10 percent of their gains from tax if they hold the investment for five years. Investors can pay no tax on the appreciation of the opportunity fund assets if they hold onto them for a decade.

Investors can exclude 15 percent of the gains from tax if they hold it for seven years—until the end of 2026, meaning they have until the end of 2019 to get started under current law.

Neil Faden, a partner at the law firm Manatt, Phelps & Phillips LLP in New York who focuses on private equity and financing, said the announcement was great news, as many investors have been hesitant to take advantage of the incentive absent regulations.

“I honestly think they’ve been trying really hard to get the regulations out,” he said, referring to the Internal Revenue Service and Treasury Department. “If they had gotten them out a year ago, we wouldn’t have this problem.”

Reporting Bill Coming

Hawkins also confirmed that Scott and Booker will release a bill to reinstate reporting requirements that were taken out of the tax overhaul bill ahead of its passage. That bill is expected after lawmakers return from recess.

The bill has the support of some members in the Democrat-controlled House, Hawkins said. House Democrats have been hesitant to make changes to the Republican-led tax law before conducting multiple hearings on its effects.

To contact the reporter on this story: Lydia O'Neal in Denver at loneal@bloombergtax.com

To contact the editors responsible for this story: Patrick Ambrosio at pambrosio@bloombergtax.com; Colleen Murphy at cmurphy@bloombergtax.com