Sen. Tim Scott said he is discussing “opportunity zone” legislation with Sen. Cory Booker that would reinstate reporting requirements removed right before the passage of the tax overhaul.
“I know Cory Booker and myself and a couple of others have had conversations about legislation that would reinforce or reinstate the reporting requirements,” Scott told Bloomberg Tax at a March 27 event at the National Press Club in Washington.
Scott (R-S.C.) and Booker (D-N.J.) introduced the tax incentive in the 2017 tax law, which is meant to drive investment in low-income areas. The opportunity zones legislation originally required Treasury to annually report on opportunity funds’ asset classes, the percentage of zones that have received investment, and the jobs created as a result, among other data points.
The language ultimately was removed because Republican lawmakers used the reconciliation process to pass the law with a simple majority in the Senate. That left observers worried that the Internal Revenue Service and Treasury won’t have the authority to administer requirements that aren’t in the legislation.
Spokespeople for Booker’s office, Treasury, and the IRS didn’t immediately respond to requests for comment.
The tax overhaul directed states to select—and Treasury to approve—census tracts in which investors can defer capital gains taxes if they plug their gains into qualifying projects in those areas. Depending on how long they hold onto those assets, investors can shield part of their gains from taxes, and can avoid capital gains tax completely on the growth in value of the assets if they hold onto them for a decade.
“What we were trying to do was keep it open-ended enough for Treasury to design what they felt would be most important,” Scott said. He added that at least some reporting requirements are crucial, and “we’re trying to put together a list between our offices of what that looks like, but we’re not there yet.”
The IRS released its first round of proposed regulations (REG-115420-18) for the incentives in October, which mainly dealt with real estate investments. Treasury sent a second batch to the White House’s regulatory review office earlier this month and is expected to detail the tax breaks’ application to operating businesses, partnerships, and C corporations.