IRS Cancels Qualified Opportunity Zone Hearing Due to Government Shutdown
In a major blow to investors, real estate developers and fund managers alike, the Internal Revenue Service (the “IRS”) cancelled the January 10, 2019 public hearing on Qualified Opportunity Zones. The Qualified Opportunity Zone Program (the “Program”), a summary of which can be found in our March 2018 and October 2018 client alerts, continues to be plagued by many unanswered questions, even after the issuance of the October 17, 2018 Treasury Regulations (the “Proposed Regulations”) designed to provide guidance on how the Program will work. While the Proposed Regulations answered questions such as which gains qualify for tax deferral benefits, which taxpayer investments will be eligible, and how to structure Qualified Opportunity Funds, to name a few, many other questions remained unanswered.
The now-cancelled hearing was supposed to provide additional clarification of the Proposed Regulations, and was an opportunity to submit testimony regarding same. A public hearing is generally required before proposed Treasury Regulations can be finalized. Such a hearing usually takes place following a specific period during which the IRS and Department of Treasury solicit comments on the proposed guidance. The IRS received in excess of 150 comments to the October 17, 2018 Proposed Regulations, seeking feedback on the definitions and application of the “substantial improvement” and “original use” tests, both of which would significantly impact how future real estate development qualifies for the Program’s tax deferral benefits. The “related party” rule is another area where substantial clarification is being sought.
The IRS will announce a new date for the hearing, which will likely be no earlier than at least two weeks after appropriations for the Department of the Treasury are restored.
Despite this delay, CSG continues to work with clients on implementing creative ways to structure Qualified Opportunity Funds and help investors take advantage of the tax benefits the Program provides. To this end, we invite you to join us on either January 31 in Livingston, NJ or February 12 in New York City for our Alternative Capital Symposium – an in-person, half-day seminar designed to educate attendees about alternative sources of capital for real estate development projects, including Opportunity Zone financing.
If you would like additional information about either of these events, please click on the relevant link below.
For more information on our capabilities servicing investors, real estate developers and fund managers involved in the Qualified Opportunity Zone Program, please visit our website or contact one of the members of CSG's Qualified Opportunity Zones Group listed below.
Jennifer M. Porter | Member | 973.530.2071 | firstname.lastname@example.org
Clem G. Turner | Member | 212.324.7262 | email@example.com
Bozena M. Diaz | Counsel | 973.530.2161 | firstname.lastname@example.org